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Negligent use of power of attorney - Recklessness - Loss of approximately $2.9 million.

Fairfield County, Connecticut

The plaintiff claimed that the defendant tax accountant committed malpractice and breached his fiduciary duty to the plaintiff, as well as acted in a recklessness manner with regard to the plaintiff’s finances. The defendant claimed that there was no malpractice or breach of fiduciary duty and that nothing the defendant did caused the plaintiff’s claim of damages.

The defendant was the plaintiff’s tax preparer. The plaintiff claimed that the defendant had, pursuant to a power of attorney, executed on the plaintiff’s behalf documents for a $7.5 million construction loan. The plaintiff claimed that the defendant was negligent in that process in that the plaintiff did not fully understand the documents and had not seen them prior to the closing on the loan.

Further, the plaintiff alleged that the defendant had not informed the plaintiff of the nature and tax consequences of the transaction. The plaintiff’s financial advisor had set up the loan in an attempt to get the plaintiff’s financial affairs under control and the plaintiff, who was out of the country at the time, gave the power of attorney to the defendant to execute the loan. The plaintiff subsequently defaulted on the loan at a loss of approximately $2.9 million. The loan was secured by securities in a pledge account which were sold and caused capital gains taxes, as well as forcing the sale of a piece of property in Norwalk, Connecticut.

At trial, the plaintiff called an expert on residential mortgage financing who testified that the loan transaction violated industry standards as well as the defendant’s employer’s own underwriting guidelines. The plaintiff also called an accountant who testified as to the breach of fiduciary duty and provided testimony regarding the plaintiff’s damages.

The defendant argued that there was no malpractice or breach of duty toward the plaintiff and that the plaintiff would have lost her securities and property regardless of any actions taken by the defendant because the plaintiff was in a precarious financial position anyway. The defendant presented an accountant who gave testimony that there was no breach of the standard of care. The defendant’s expert performed and presented a damage analysis that indicated that the plaintiff’s financial situation which existed before the transaction in question would have caused the loss of the plaintiff’s securities anyway. Therefore, the defendant argued, there was no causation and no damages.

The jury found for the defendant on all three counts. In addition, the jury found no causation and the court ruled that the claim was barred in any event by expiration of the statute of limitations.

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