by Brian Mahany
We follow large fraud cases against auditing firms. Look no further than this blog for plenty of horror stories about auditors turning a blind eye to corruption and fraud. Unfortunately, the system is broken. How can an auditor truly be independent when he or she is dependent on the client to get paid? If you are “too honest” in your audit report chances are you won’t get hired again.
In the wake of the Bernie Madoff scandal, M-Invest, Ltd. a Cayman Islands hedge fund, sued Ernst & Young for its audit work. According to the suit, the liquidators of M-Invest said it relied on the accounting firm giant for malpractice and negligence. (M-Invest became insolvent as a result of its investment in Madoff.)
The lawsuit, which had been filed in the New York Supreme Court, was dismissed last week. No reason was given in the 1 paragraph dismissal filed with the court. Ernst & Young had always maintained that the charges were without merit.
Previously, M-Invest had agreed to pay $500 million to settle charges brought by the Madoff bankruptcy trustee, Irving Picard.
It’s not unusual in Ponzi schemes for some or all the money to be missing. By its very design, a Ponzi scheme soon topples under its on weight. When it collapses, the most recent investors usually get nothing. Creative lawyers are forced to look for the deep pockets in those cases. Accountants, auditors and lawyers are often brought in for their role in facilitating the fraud or failing to detect it. Here, the fund’s liquidators thought Ernst & Young were negligent.
If you lost money in a Ponzi scheme or investment fraud, don’t delay. Assets disappear quickly and often there are only a few (if any) deep pockets or insurance companies that may have some liability and some ability to pay. The earlier you make your claim, the better the chance of collecting.
Although interested in helping all victims of fraud, we are currently most interested in speaking with accountants or auditors who may have been involved in auditing mortgage lenders. HUD, and therefore the American taxpayers, lost billions from bad loans. Sometimes people simply lost their jobs and could pay their mortgages but often lenders cut corners and issued bad loans. The government relies on independent audits to insure that lenders are following the rules when certifying loans as proper. If you know of any lender breaking the rules or auditor turning a blind eye, let us know. We are especially interested in speaking to former employees of KPMG.
Whistleblowers who help the government with false claims cases may be entitled to as much as 30% of what the government collects. Our firm presently has the largest mortgage lending federal false claims act case in the country – HUD’s $2.4 billion case against Allied Home Mortgage. That case was started by a whistleblower. If you have information about bad auditing or lending practices we would love to speak with you.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Wisconsin, Michigan, Maine & Minnesota. Services available in many jurisdictions.