A Kentucky circuit court judge has ruled that Grant Thornton is liable for more than $100 million in damages to be paid to a business owner and his family after he was sold an offshore tax shelter that the Internal Revenue Service considered abusive.
After a month-long trial, Kenton Circuit Court judge Patricia Summe ordered Grant Thornton to pay Bill Yung, the president of the Crestview Hills, Ky.-based hotel company Columbia Sussex, his wife Martha and the 1994 William J. Yung Family Trust a total of more than $100 million, including $20.22 million in compensatory damages, and $80 million in punitive damages. Yung and his family were represented in the case by the law firm Graydon Head, based in the Cincinnati and Northern Kentucky area.
Judge Summe concluded in a ruling last Friday that Grant Thornton's conduct toward the Yungs was "reprehensible," further finding that the fraud continued from 2000 all the way through trial. She also found that Grant Thornton's actions harmed Bill Yung's reputation and contributed to his inability to secure licensure from the Missouri Gaming Commission in 2005.
Grant Thornton plans to appeal the ruling. “We are disappointed in the court's ruling and believe we have strong grounds for an appeal, which we will pursue,” said Michele Mazur, a spokesperson for the firm.
According to the decision, in early 2000 Grant Thornton began developing a tax product to move clients' offshore money into the United States with minimal tax consequences, around the same time that the Treasury Department and the IRS began cracking down on what they perceived as abusive tax shelters.
The Yungs argued they were sold such a product, even though Grant Thornton knew the IRS would characterize it as an abusive tax shelter. According to the lawsuit, Grant Thornton did not inform the Yungs of those facts, and the firm's tax advice cost the family millions in unnecessary taxes, penalties and interest.
The suit stretched on for six years and culminated in a trial that ended last year. The court laid out the basis for Grant Thornton's liability in 210 pages of findings of fact and conclusions of law, resulting in the $100 million judgment. The judgment is not yet final, as the court intends to conduct a hearing on the remaining issue of sanctions for discovery abuses leading up to trial.
"It took a special client in Bill Yung and his family to pursue this complex claim against an infinitely resourced national accounting firm," said Graydon Head lead trial attorney Kevin Murphy in a statement. "Our team is proud to have represented them in this David versus Goliath case, and we are just pleased to have delivered a victory."