A former principal at TCBA Watson Rice LLP has sued the accounting firm and its managing partner, claiming he was illegally terminated for refusing to sign a tax return.

Former director of taxation Patrick L. Largie filed a $1 million lawsuit against the firm and its managing partner Bennie Hadnott in the U.S. District Court of New Jersey. The firm has long enjoyed a reputation for being one of the most ethnically diverse in the New York and New Jersey area. Largie claimed in his lawsuit that he was fired after he refused to sign and file the firm’s own Form 1065 federal tax return for 2009.

While preparing the return last September, Largie said he had noted a proposed entry on Line 20 for “other deductions” of $1.8 million, which upon investigation he found to be “inaccurate and false.”  A three-hour meeting followed, in which he claims Hadnott persistently attempted to force Largie to execute the disputed tax return despite the latter’s concerns for prospective criminal exposure for filing a form with false information and overstated consulting expenses. Largie feared the action could have led to an IRS investigation and possible criminal charges.

Hadnott labeled the claims “a nuisance lawsuit” and said the dispute was going into mediation on February 4.

“You get those filed all the time,” he said. “You can’t control what people go out there and do. We filed an answer to that, but there was no merit to it. He got mad because he was terminated with cause. People get emotional and go out there and try to sue the whole world, which he did. You have no control over people going out there and filing actions like that.”

Hadnott claims that Largie was expelled from the partnership for diverting funds from the firm and its clients, and that it had nothing to do with signing a tax return. He said that Marcum did a forensic investigation.

Also in dispute was Largie’s belief that Hadnott had misappropriated almost $500,000 by creating fictitious loans, among other things, from the firm’s operating accounts. Largie claims that Hadnott also used his consulting company to perpetrate the fraud.

“How can I steal from myself?” responded Hadnott. “If I have loaned the company $400,000 or $500,000, why would I steal from myself? I got all kinds of money that I put in, plus the guy had a 3 or 4 percent interest in the practice. The people who had the least interest are going to go out and make the most noise. We have addressed all that. In fact, the irony of this thing is that he has been sued for about $1 million.”

Hadnott hinted that Largie’s lawsuit came in retaliation after the firm learned of his actions and dismissed him, but he declined to elaborate on the firm’s claims. “I can really prosecute him for smearing our name, but we are just trying to be cool about it,” he said. “We don’t want to drag him through the mud.” He believes that the mediation on Friday will resolve all the issues and “send him [Largie] on his way.”

Largie’s suit seeks to recover unpaid compensation and earnings from Watson Rice from 2007 through 2009, amounting to more than $300,000, as well as treble damages for his allegations of “misconduct at the highest level of the partnership and acquiescence of such misconduct by all of the defendants.”

Largie joined Watson Rice in 1998, became director of taxation two years later and became principal tax partner in 2001, reporting to Hadnott. Largie claims that Hadnott illegally locked him out of his office in October 2010. That act also constitutes part of the damages that Largie seeks to recover from this lawsuit.

The suit also names as defendants Thompson, Cobb, Bazilio and Associates, a Washington-based affiliate with Watson Rice; Tondah, the Watson Rice consulting service; Glenda Hadnott, Bennie’s sister and Tondah part-owner, and Marcevir L. Bernardo, a long-term Watson Rice partner. The lawsuit was filed on Oct. 17, 2010 by Canter Law Firm P.C. of White Plains, N.Y.

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