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We write today about an action filed by John DeLollis, Tom
Holsman, Douglas McCarron and Frank Spencer in their capacity as
trustees of the Empire State Carpenters Annuity Fund ("Empire
Annuity Fund") and the Empire State Carpenters Pension Fund
("Empire Pension Fund") (collectively, the "Empire
Funds") "to recover losses suffered by the . . . [Empire
Funds] as the result of Defendant's negligent performance of
its professional obligations as the accounting firm that audited
the financial statements of the Income- Plus Investment Fund
('Income-Plus'), which had substantial assets invested with
and managed by Bernard Madoff and/or Bernard L. Madoff Investment
Securities LLC (collectively, 'Madoff')."
Plaintiffs filed their Complaint on or about May 1, 2012 in the
Supreme Court of the State of New York, County of Nassau. According
to the Complaint, "[a]s Income-Plus's auditor, Defendant
was required to perform its work in accordance with Generally
Accepted Auditing Standards ('GAAS') to determine whether
the financial statements of Income-Plus were prepared in conformity
with Generally Accepted Accounting Principles
('GAAP')." The Complaint alleges that, in order to
comply with GAAS, the auditor must "plan and perform each
audit in a manner that provides reasonable assurance that the
financial statements are free of material misstatement, whether
caused by error or fraud."
Plaintiffs then allege that "Defendant was negligent in
performance of its auditing services and failed to conduct its
audits in compliance with GAAS. Defendant issued unqualified audit
opinions despite having insufficient information to provide it
reasonable assurance that the financial statements were free of
material misstatement." The Complaint further alleges that
Defendant's audit procedures "were particularly deficient
given the substantial concentration of Income-Plus assets held by
one manager (Madoff), the fact that Madoff did not hold assests
invested by Income-Plus in an independent third-party custodial
account, and the absence of any reliable independent audit report
of Madoff."
According to the Complaint, "Defendant intended that the
participants of Income-Plus, including the Empire Funds . . . would
be relying on the audit reports that Defendant prepared for and
provided to them in making decisions regarding their investment
holdings in Income-Plus." The Complaint avers that absent
Defendant's alleged negligent performance of its auditing
services, "the Empire Funds would not have maintained
investments in Income-Plus or made any new investments of capital
in Income-Plus or any other Madoff-related investment." The
Complaint further avers that "Defendant failed to perform its
duties with the requisite degree of care and professional
competence, by, among other things, failing to act in accordance
with professional standards of care including GAAS, failing to
exercise professional skepticism, expressing unqualified opinions
on financial statements that were not prepared in accordance with
GAAP, and negligently expressing unqualified opinions on the
statements of changes in capital account of the Empire
Funds."
In the Complaint, Plaintiffs request that the Court
"[a]ward damages in an amount to be proven at trial to
compensate the Empire Funds for the losses suffered by the Empire
Funds as a result of Defendant's negligence."
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