Vitale Caturano & Co. is facing a malpractice lawsuit for allegedly failing to properly investigate a number of red flags that could have tipped a prominent New England family off to the looting of some $57 million from its trust funds.The Ayer Family Trusts holds several hundred million dollars for about 100 descendents of industrialist Frederick Ayer. Those trusts are managed under the Tenens Corp. (which does business as Essex Street Associates), and had been largely overseen by the corporation’s former chief operating office, and an employee of more than 30 years, John Doorly.
According to other court documents, Doorly engaged in the “systematic looting” of $57 million from the trust funds, much of it through the use of duplicate accounts -- spending freely on his wife, son, his mistresses; investing in shopping malls, car dealerships and sports marketing companies; and expensing amenities such as planes, limos, vacation homes and exotic golf trips.
Doorly was fired from the position in March 2006, but the Ayer family’s suit against Vitale Caturano claims that the Boston-based firm should have acted more quickly to investigate Doorly’s secrecy regarding a number of trusts, and notes that the funds suffered losses of more than $10 million during Vitale Caturano’s time as auditor.
According to the Boston Herald, in deposition filings Doorly has acknowledged that while he transferred Tenens funds to various accounts, they were merely loans that he intended to repay.
“We met all of our professional obligations in this case, as we do every day for every client,” firm president and co-founder Richard Caturano told WebCPA. “We are sorry it has come to this, but know that we have the facts on our side, which will be clear as this goes through the legal process.”
The alleged fraud dates back to the mid-1990s, when the trusts were being audited by Vitale Caturano’s predecessor, PricewaterhouseCoopers. Vitale Caturano was appointed as auditors in 2004, and the lawsuit says that the firm was in the midst of preparing the 2005 year-end audit when the alleged fraud was uncovered.
The lawsuit, which specifically takes issue with how Vitale Caturano selected the trusts it tested and includes a number of excerpts from internal correspondence between members of the firm’s audit team, was filed in Suffolk County Superior Court in mid-January.
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