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ARTICLE ID 40976

$________ INCLUDING $________ PUNITIVE AWARD - ACCOUNTING MALPRACTICE - UNDERVALUATION OF REAL ESTATE HOLDINGS - OVERSTATEMENT OF CORPORATE LIABILITY - LOSS OF PROPERTY.

Butler County

The plaintiffs husband and wife, who were former shareholders in four corporations which retained the defendant accounting firm for evaluation of the businesses, alleged that the defendant provided inaccurate and false information to a bankruptcy court, resulting in an entire loss of the plaintiffs’ property. The defendant maintained that it used standard accounting principles and methods which are accepted throughout the industry.

The evidence established there was a federal investigation concerning one of the corporations in which the plaintiffs were shareholders. The corporation was accused of overselling the interest in properties it owned. Some of the corporate shareholders, including the male plaintiff, were indicted in connection with the charges. The four corporations were then placed into a bankruptcy proceedings.

The defendant accounting firm was retained by the chief executive officer of the four corporations in which the plaintiffs were shareholders. The defendant accounting firm was responsible for advising the bankruptcy court as to the financial condition of the corporations. The plaintiffs alleged that all of the corporations were described as being insolvent by the defendant accounting firm when they were, in fact, solvent.

The plaintiffs claimed that as a result of the information provided by the defendant and the way the bankruptcy schedules were prepared, all of the combined corporate assets were turned over to investors and the plaintiffs lost everything.

The plaintiffs contended that they owned one property worth $90 million which was consolidated with the assets of the corporations. The $90 million property was described by the defendant as being worth only $2 million, according to the plaintiff’s claims.

In addition, the plaintiffs alleged that one corporation which had taken money from investors was described by the defendant as having $70 million in debt. The plaintiffs claimed that this corporation actually had $70 million in equity with a much lower debt figure.

The plaintiffs’ accounting expert testified that the defendant violated acceptable accounting standards and had provided incorrect information to the bankruptcy court, resulting in the plaintiffs entire interest being seized and given to the investors who had lost money.

The plaintiffs denied responsibility for any corporate wrongdoing and maintained they were not liable to the investors. The plaintiffs’ economist estimated the plaintiffs lost $68 million in property. The defendant did not dispute that figure. The defendant’s accounting expert opined the defendant did not violate any accounting rules.

The case was tried as a bench trial with an award to the plaintiffs in the amount of $________. The award included p 7 3 $________ in punitive damages plus interest. Posttrial motions are pending.

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