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Accountants' Defense

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Morrison & Foerster has a proven track record of defending accounting firms and professionals in securities class actions, derivative cases, SEC enforcement proceedings, PCAOB and state accounting board investigations, audit committee inquiries, employment litigation, and white-collar criminal defense cases. Our litigators are renowned for their ability to succeed in high-stakes, complex cases, including those arising from accounting issues generated outside the United States.

Our practice includes a Forensic Accounting Services Group that provides specialized accounting and financial services.

The FASG is headed by a former audit partner with more than 35 years of experience who is also a Certified Fraud Examiner, and helps clients identify, interpret, and clarify financial and accounting matters.

Representative Clients

  • Deloitte LLP
     
  • Ernst & Young LLP
     
  • Grant Thornton LLP
     
  • Marcum LLP
     
  • Reznick Group
     
  • Swenson Advisors LLP
     
  • Arthur Andersen LLP
     
  • Multiple Individual Accounting Professionals

Representative Matters – Civil Litigation

  • Following a three-week trial in California Superior Court, won a unanimous jury verdict defeating claims by a hedge fund seeking tens of millions of dollars that the hedge fund claimed it would not have invested but for the accounting firm's audit opinion. The jury found that our client performed a GAAS audit and made no misrepresentations of any kind. (SP Syntax LLC v. Ernst & Young LLP, et al., 2010)
     
  • Following a three-week trial in the Southern District of New York, won a unanimous jury verdict in an actuarial malpractice case. The case stemmed from the decision by the New York State Department of Insurance to place Frontier Insurance Company ("FIC") in rehabilitation. FIC's parent sued to recoup $200 million invested in its subsidiary allegedly in reliance on our client's assessment of the company's reserve estimates. The jury found that the actuarial work complied with professional standards and that our client made no misrepresentations of any kind. (Frontier Insurance Group, Inc. v. Ernst & Young LLP, 2009)
     
  • Following a month-long bench trial in Oregon state court, obtained complete defense verdict in an audit malpractice case brought by a lender to a former client of the firm.
     
  • Won a unanimous award from a panel of arbitrators in a proceeding where the bankruptcy trustee of the former audit client alleged negligent audits of a publicly-traded distributor of healthcare products.
     
  • Defeat of class certification and dismissal of $300 million lawsuit by former clients who had adopted tax shelter structures recommended by our client that allegedly were later deemed abusive by the Internal Revenue Service.
     
  • Defense jury verdict in case arising out of alleged negligence in connection with due diligence services provided in connection with acquisition by Fortune 500 company.
     
  • Won a complete defense verdict after a three-week trial in an audit malpractice case brought in Los Angeles Superior Court by a former bank client of the firm.
     
  • Ongoing defense of putative class action alleging misclassification of audit employees, failure to pay overtime, missed meal and rest breaks, failure to provide appropriate pay stubs, failure to timely pay all wages due, and violations of Bus. & Prof. Code section 17200.

Representative Matters – DOJ / SEC Proceedings

  • Defense of auditor in SEC investigation involving allegations of securities fraud and improper professional conduct arising out of the audit of a public company at which numerous members of top management were criminally convicted of engaging in a massive, collusive accounting fraud. After receiving our Wells submission, the SEC terminated its investigation without commencing an action against our client.
     
  • Defended Members of Board of Directors of a national accounting firm in DOJ and IRS tax shelter investigation. While the investigation led to charges against a number of individuals, none were filed against our clients.
     
  • Successfully defended Chief Financial Officer and Chief Accountant for public company in SEC enforcement proceedings and a Chief Accountant in an IRS investigation of tax advantaged transactions.
     
  • Successful resolutions in separate SEC investigations arising out of multiple restatements by a major media company, and relating to back-dating of options at a well-known technology company.
     
  • Ongoing defense of accounting firm in Grand Jury investigation of accounting procedures and tax treatment of interests held in blind trust for an elected public official.

Representative Matters – PCAOB / Regulatory Investigations

  • Represented audit partner in a trial before a five-member Hearing Panel of the AICPA's Professional Ethics Division. After a two-year investigation, the Division accused the CPA of numerous violations of AICPA rules and professional standards in the provision of audit and tax services. At the conclusion of the trial, the Panel found the CPA innocent of all charges.
     
  • Defense of audit firm and its principals in PCAOB investigation and investigations by various states concerning audit of a Chinese public company. Successfully negotiated a favorable settlement on behalf of audit firm and its principals.
     
  • Advice in connection with PCAOB investigation following examination.
     
  • Defense of investigation by the AICPA's Professional Ethics Division of possible improprieties in audits of a publicly held company.
     
  • Defense of numerous investigations by State Boards of Accountancy into audit and tax work.
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