CPAs, accountants and accounting firms must perform their duties with reasonable care consistent with applicable professional and legal standards and must act in the best interest of the client. An accounting professional can be held responsible for damages and losses suffered by the client if, for example, the accountant acts with knowledge that a particular practice was inappropriate. A failure to perform within ethical and legal guidelines or accounting standards may also constitute accountant negligence and subject the accountant to liability for a client’s losses.
Generally speaking, accounting standards obligate an accountant to anticipate outcomes that may be harmful to clients. The client is, of course, relying on the accountant’s professionalism and judgment. The accountant should not withhold information that the accountant knows would have a material impact on the client’s decision making process.
Sometimes accountants propose tax shelters to clients that nonetheless end up requiring clients to later pay taxes, penalties and interest when the shelters are audited and fail to perform as promised. If the accountant withheld information about the likelihood of the tax shelter failing, the accountant could potentially be held liable for the client’s losses resulting from the failed shelter.
Bill Yung and his family sued the accounting firm Grant Thornton LLP, over a tax shelter that had been promoted to them. Last month, a Kentucky state court ordered the accounting giant to pay $20M in compensatory damages and $80M in punitive damages to Yung and the other plaintiffs.
The judge ruled that Grant Thornton knowingly sold Mr. Yung a bogus and abusive tax shelter. The court found that Grant Thornton knew there was a 90% chance the IRS would reject the shelter, but hid this information from Yung. Furthermore, when Mr. Yung expressed concern about the shelter, Grant Thornton falsely claimed it had successfully used the shelter with General Electric Co. and Proctor & Gamble Co., saving them millions.
Before convincing Mr. Yung to employ the proposed shelter, Grant Thornton’s own legal review concluded that the shelter had an overwhelming chance of being deemed illegal. The accounting firm hid this negative legal opinion from Mr. Yung and tried to cover it up. An internal Grant Thornton email said: “Do not share this opinion with anyone, internally or externally, as we are trying to maintain control of its distribution. The attached copy should be shredded here on Monday morning.”
At Heygood, Orr & Pearson, our attorneys have handled hundreds of commercial litigation cases ranging in value from tens of thousands of dollars to tens of millions. We have successfully sued some of the largest corporations in the world, including Grant Thornton, Merrill Lynch and other accounting and financial services companies.
Whether we are representing a huge, multi-national corporation or a small local business, we understand that clients want their legal representation to be not only excellent but cost-effective and efficient. For that reason, we will often offer our clients flexible fee structures such as contingent fees, flat fees, reduced hourly fees with a bonus payment contingent on success and reverse contingent fees.
At Heygood, Orr & Pearson, our success stems from the fact that our attorneys are trial attorneys in the truest sense and have tried hundreds of cases to verdict. Among our team are numerous attorneys who are board certified* and who have been voted by their peers as Super Lawyers in the state of Texas for several years in a row.** Our firm is AV-rated, the highest legal and ethical rating available from the leading law firm rating service.
As a result of their experience, expertise and trial ability, our attorneys have obtained dozens of significant commercial verdicts and settlements for our commercial clients. Among the more notable are the following:
- Obtained an $18 million verdict in favor of a European entrepreneur in a lawsuit against a subsidiary of a Fortune 500 company involving the sale and distribution of computer products in Europe.
- Successfully defended an international businessman in a $200 million fraud and breach of contract case arising out of the discovery of the world’s largest nickel deposit in Labrador.
- Obtained a $16 million settlement on behalf of a Fortune 500 company involved in a construction dispute relating to a parking garage.
Regardless of the type of claim, the size of the client or the complexity of the dispute, Heygood, Orr & Pearson has the legal ability, financial wherewithal and level of commitment necessary to successfully represent the interests of any commercial client. If you or your company is in need of representation in a commercial dispute, contact us for a free consultation by calling toll-free at 1-877-446-9001, or by filling out our free case evaluation form located on this page.
* Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.
** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2013.