Some call Evgeny Freidman a taxi mogul. Others call him a fraudster. In a complaint long on accusations but short on facts, Freidman is suing his accounts for malpractice. The complaint filed May 18th says that Getzel, Schiff & Pesce “(i) failed to perform the basic functions required of a certified public accountant; (ii) failed to file tax returns for plaintiff and his affiliated entities — a function of the parties’ relationship that was expressly requested by plaintiff and (iii) refused to return any and all tax returns, reports, or other documents in defendants’ possession, custody and control that reflects or related to plaintiff and his business operations.”
Friedman has been in quite a bit of trouble recently. Last year another cab company accused Friedman of stealing $1.6 million and hiding it from creditors. Also in 2016, a federal bankruptcy judge found that he had illegally transferred ownership of $60 million in real estate holdings to several offshore trusts. Those transfers were apparently done to defraud creditors.
A group of taxi cab owners complained last year to the New York City Taxi and Limousine Commission that Freidman shouldn’t be allowed to operate cabs in the city since he reportedly owed $13 million in back taxes. Taxi riders are charged an extra 50¢ per trip to help fund the city’s subway and bus system. The states’ Metropolitan Transportation Authority believes that Freidman collected millions of dollars in these fees from riders but never turned the money over to the state.
According to the lawsuit, Jeffrey Getzel and Getzel, Schiff & Pesce provided accounting services to Freidman and his taxi businesses for many years. The relationship was so cozy that Freidman considered his accounts to be his de facto CFO. Not only did Getzel’s firm prepare tax returns and financial statements, they also provided financial advice.
The latter could be significant in that providing tax planning or business advice generally means that the accountants owe a fiduciary duty to their client. Despite popular opinion, merely preparing tax returns or keeping a company’s books does not mean the accountants have a fiduciary duty.
It’s not exactly clear what wrong or why but the complaint says that “without warning or provocation,” Getzel, Schiff & Pesce stopped acting in Freidman’s best interests. The complaint also says that the accountants disclosed confidential information with third parties.
The complaint seeks unspecified monetary damages including punitive damages and attorneys’ fees. The complaint also seeks to compel the accountants to return all of Freidman’s financial records.
Is Getzel, Schiff & Pesce Guilty of Accounting Malpractice?
That is certainly tough to answer. There is not much in the way of factual allegations in the lawsuit. A lawsuit which Evgeny Freidman filed himself.
How that case turns out may hinge on the duty of care that Getzel owed to his his client.
Reasonable Care or Fiduciary Duty?
Accountants have a duty to use reasonable care when completing tax returns or financial statements for clients. They have a much higher duty, however, if they are also providing financial or tax planning advice.
Freidman has faced many problems in recent months from tax audits, to multiple bankruptcy filings, an investigation by the state attorney general, a sexual harassment suit and even a nasty divorce. How many of these problems are of his own doing and how many (if any) are the fault of the accountants? Is this lawsuit simply a preemptive strike to keep the accountants from cooperating with subpoenas from judgment creditors?
We suspect like everything else about Evgeny Freidman, this drama will play itself on the front pages of the Daily News and New York Post. It is a case we are following.
MahanyLaw and Professional Malpractice
MahanyLaw is a full service, nationwide boutique law firm that represents victims of fraud and professional malpractice. Our sole mission is to help stop fraud and obtain justice for the victims of these crimes (whistleblowers too.)
If you lost money because of wrongdoing or negligence by an accountant or other financial professional, please contact us.
Common accounting malpractice scenarios include bad tax and business advice, interest and penalty assessments caused by bad tax return preparation, poor quality audits, failure to detect fraud and promoting abusive tax shelters (419 plans, welfare benefit plans and captive insurance schemes).
Be aware that the time to bring accounting malpractice claims varies widely state to state. Even if you are not sure if you have a claim, do not delay in calling us.
All inquiries are protected by the attorney – client privilege and kept confidential.
MahanyLaw – America’s Accounting Malpractice Lawyers
(Please note that we consider cases nationwide with provable losses of $1 million or more.)