Florida accounting firm Kaufman Rossin has reportedly agreed to pay $9.6 million to settle a lawsuit connected to its audits of two collapsed Palm Beach hedge funds that invested money with convicted fraudster Tom Petters.
The bankruptcy trustee for the two funds, Palm Beach Finance Partners and Palm Beach Finance II, sued the firm last November for over $1 billion, accusing it of professional negligence and malpractice in its audits, according to the Miami Herald. Petters was convicted last year in Minneapolis of wire and mail fraud and received a 50-year prison sentence for running a $3.65 billion Ponzi scheme.
The two funds, which collapsed last year, reportedly raised $1.1 billion from approximately 100 investors and lent the money to Petters, whose Minnesota-based companies then used the money to buy and resell electronic equipment.
The firm did not admit liability. The money for the settlement will come out of Kaufman Rossins professional liability insurance policy. The bankruptcy trustee who sued Kaufman Rossin is Barry Mukamal, a partner in the advisory services practice of another Florida accounting firm, MarcumRachlin.
It was in the estates best interest and in Kaufman Rossins best interest, Mukamal said of the settlement. It was concluded after an evaluation of the matters at issue and in consultation with my accounting experts and with legal counsel, and with the concurrence with the major creditor in one of the estates.
He expects there to be much more litigation in the case, however, and noted that he filed a bankruptcy plan for reorganization of the two estates for the collapsed funds.
The law firm representing the trustee will also be suing other third parties, but it has concluded its litigation with Kaufman Rossin. "We think it's an excellent result," said Michael Budwick, an attorney with Meland Russin & Budwick. "We're looking forward to the other litigation claims that we intend to pursue with the other third parties."
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