Baltimore (March 11, 2003) - The CPA firm of Ellin & Tucker has been added to a $6 million fraud lawsuit filed by Connecticut-based Bon Secours Community Investment Fund LP, which lost $1 million investing in the now-defunct telecommunications company Network Technologies Group Inc.
The lawsuit, filed last week in Baltimore City Circuit Court by Bon Secours, represents the first public accusation that Ellin & Tucker bears any responsibility for alleged accounting fraud at NTG. This activity supposedly resulted in the loss of millions of dollars for NTG's bank Mercantile-Safe Deposit & Trust Co. and two investors, including the Bon Secours fund, a Baltimore Business Journal report indicated.
The fund gave $1 million to NTG in March 2002 for 353,714 shares of convertible preferred stock, now valueless after NTG's collapse. Bon Secours is currently suing NTG, company officers, board members, and now Ellin & Tucker for $1 million. It is also seeking $5 million in punitive damages.
"We can’t really say much other than we strongly feel these charges and claims are inaccurate and without merit," an Ellin & Tucker spokesman told Electronic Accountant." The firm plans to dispute the charges in court, but has yet to select an attorney to represent them, he added.
The lawsuit essentially states Ellin & Tucker should have done a better job in uncovering any financial irregularities at NTG. It also claims financial projections and other documents Ellin & Tucker prepared for NTG were used by investment bank Smith Whiley & Co. to decide whether to invest the Bon Secours money in NTG.
Smith Whiley, which manages Bon Secours’ day-to-day operations, began its due diligence of NTG in September 2001. Ellin & Tucker began fieldwork for NTG's 2001 audit in November 2001.
Four NTG officers were indicted January 22 on 10 counts of fraud for allegedly doctoring financial records to obtain more than $5 million in financing from Mercantile, the Bon Secours fund, and Baltimore's Abell Foundation.
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