Insurer Successfully Denies Large Claim
Admiral Insurance Company has successfully denied a large claim from Silverman Neu LLP after a federal judge ruled in their favor.
Silverman was jointly and severally liability for a portion of a $259M 2009 verdict that included $137.5M against BDO Seidman LLP and $25.9M against Kostin Ruffkess & Co. LLP. Silverman was hit with $42.8M.
The underlying class action center on the accounting firms assisting Cambridge Credit Counseling and Cambridge/Brighton Budget Planning violate the Credit Repair Organizations Act.
Silverman had purchased a $4M policy from Admiral that contained an absolute exclusion for wrongful acts. The case highlights the need to negotiate the finer points of policy coverage and to present claims in a way that makes it difficult for insurers to deny.
KPMG Resigns from Herbalife and Sketchers Due to Insider Trading
Earlier in April, KPMG resigned from two large clients over misuse of those client’s data. The partner in charge of the audits for those two public companies was found to have used non-public information to make stock trades. Because the data was collected as part of the firm’s audit engagement, the firm has fired the auditor and disengaged itself from these two clients. A firm of 22,000, KPMG is disavowing the actions of this partner as rare and wrong.
Every accounting firm owes the duty of loyalty and care to all its clients. A firm should take careful note to not only maintain rules and regulations to keep client information secure, but to actively check to see that such protocols are being followed and modeled by all members of a firm. KPMG paid a large price by dropping two large and well-known clients. It is a price no firm would want to pay and each firm should protect against.
Anti-Fraud Case Study Released
The Anti-Fraud Collaboration – a partnership of the National Association of Corporate Directors, the Center for Audit Quality, Financial Executives International and the Institute of Internal Auditors – has released a case study on how fraud might be perpetrated and detected at a company. The study is meant to serve as a discussion guide to help firms think through just where fraud can arise at a company and to make auditors more alert during their due diligence. The study and accompanying study guide can be found here.
In order to best protect your firm, carefully crafted insurance terms should be combined with great risk management. Contact InsureAccountants.com to discuss how these topics might apply to your firm.