The Moss Adams accounting firm was sanctioned for not
complying with a bankruptcy trustee's subpoena for documents related to Frederick Darren Berg's Meridian Mortgage
$100 million real estate investment Ponzi scheme. The court ruled that Moss
Adams did not fully comply with a 2010 subpoena and must compensate the trustee
for the costs of the legal battle to get the information. A copy of the court's
unpublished decision is here.
Moss Adams had audited some of the Meridian Mortgage
funds and also did Berg's personal taxes. The trustee in the Meridian case
served a subpoena on Moss Adams in his effort to reconstruct the debtor's records,
most of which had been seized by the FBI.
Following service of the subpoena, the trustee commenced litigation
against Moss Adams for negligence in the preparation of the audits of six
Meridian funds between 2001 and 2007. For over two years, the trustee and Moss
Adams have battled whether Moss Adams has produced all records responsive to
the subpoena. Among other things, Moss Adams blamed a copying firm for not
delivering some boxes of its documents. The court found that Moss Adams did not
issue a litigation hold and failed to preserve emails on the company's Outlook
server after receiving the subpoena, among other actions which the court found did
not comply with the subpoena.
The amount of the sanctions is to be determined by
separate motion, and the trustee has said that he believes the sanctions will
be in excess of $250,000.
Read additional articles at The Ponzi Scheme
Kathy Bazoian Phelps is the co-author of The Ponzi Book: A Legal
Resource for Unraveling Ponzi Schemes (LexisNexis 2012), along with
Hon. Steven Rhodes. The Ponzi Book, recently reviewed by the ABI Journal and Commercial
Crime International, is available for purchase at www.lexisnexis.com/ponzibook,
and more information about the book can be found at www.theponzibook.com.
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