Well known attorney has a longtime relationship with a CPA.  CPA moves from firm to firm and takes the attorney’s tax business with him.  It seems that he then files falsified tax returns, takes the attorney’s money and holds on to it, and does so while using his firms’ computer tax programs.  CPA is indicted and pleads guilty.  Will the firm be responsible?

Targum v Citrin Cooperman & Co., LLP 2016 NY Slip Op 31628(U) August 25, 2016 Supreme Court, New York County Docket Number: 650665/2014 Judge: Saliann Scarpulla does not reach an answer, but posits many questions.

“Defendant Citrin is the accounting firm of which Weber was a partner when his misconduct was discovered. Also named as a defendant is Lorraine Weber, Weber’s wife. After discovering Weber’s misconduct, Citrin and the Targum plaintiffs have each alleged claims against the other, seeking to recover some of the losses each sustained as a result of Weber’s unlawful conduct. Targum and Weber were longstanding friends. In 1989, Weber became employed by the accounting firm Richard Friedman & Associates, C.P.A., P.C. (“Friedman”). In 1990, Weber began providing tax preparation and related services for the Targums, and Weber continued to prepare the Targums’ taxes through 1999, while Weber was at Friedman. In 2000, Weber began working for Financial Appraisal Services, Ltd. (“FAS”). During his years at FAS, Weber continued to do accounting work for the Targums. Weber left FAS, and in August 2004, became a partner at Citrin. At Citrin, Weber was under the direct supervision of Gary Karlitz (“Karlitz”), the leader of Citrin’ s Valuation Services, Forensic Services, and Forensic Accounting Group (“VSFSFA Group”). At Citrin, Weber signed Partnership and Admission Agreements. The Admission Agreement provided that “Weber shall provide professional services only on behalf of [Citrin].” . The Amended and Restated Partnership Agreement, dated as of January 1, 2007, states, “[ t ]he Partnership shall charge reasonably for all professional services rendered by it following generally the policies of the firm as to the fees charged from time to time. However, each Partner may serve professionally, without charge, any individual member of his own immediate family.”

“After that meeting, also on February 28, 2012, Cooperman sent a form letter to Targum and Seeman. In the letter, Targum and Seeman were advised that Citrin had recently learned that Weber, who was no longer affiliated with the firm, had been independently performing tax-related and perhaps other services, all in violation of his Partnership Agreement, without the firm’s knowledge or authorization, and without each letter’s recipient having been a firm client. Citrin advised Targum and Seeman that Weber had informed the firm that he may not have filed certain of their tax returns and may not have made tax payments to the appropriate authorities and “suggest[ ed] that [they] immediately consult with an independent accountant and/or attorney.” Weber pied guilty in February 2013 to an indictment in connection with his unlawful conduct toward the Targums, Bardach, and a receivership that benefitted two children, as well as for his own failure to file taxes. He agreed to pay restitution to those individuals for the sums taken, including $828,128 to Targum. ·Weber admitted that he had stolen the Targums’ wired tax payments, used up much of it, and had transferred some to accounts in his or his wife’s name. Weber also conceded, during his allocution, that he had misrepresented to Targum that the account was a Citrin account, and “created the impression that this [payment] process was both known to and accepted by Citrin Cooperman, and more efficient for the taxpayer.” Weber also admitted some of his misdeeds as to the filing and failure to file, including the falsification of certain tax returns·. ”

“”It is well established that before a defendant may be held liable for negligence it must be shown that the defendant owes a duty to the plaintiff. In the absence of duty, there is no breach and without a breach there is no liability.” See Pulka v Edelman, 40 NY2d 781, 782 (1976) (internal citations omitted). An accountant owes a duty “to the party contracting for the accountant’s services,” see William Jselin & Co., Inc. v Landau, 71 NY2d 420, 425 (1988),4 but “accountants do not have a duty to the public at large.” Parrot v Coopers & Lybrand, L.L.P., 263 AD2d 316, 319 (1st Dept 2000), aff’d 95 NY2d 479 (2000). Similarly, an accountant-client relationship is a necessary element to the Targum plaintiffs’ fiduciary duty claim. See Tai v Superior Vending, LLC, 20 AD3d 520, 521 (2d Dept 2005). Thus, the Targum plaintiffs’ negligence claims, as well as its claim for breach of fiduciary duty, depend entirely upon a finding that the Targum plaintiffs were Citrin clients. ”

“Accordingly, although I originally determined to convert this motion to a summary judgment motion, I decline at this time to dismiss the Targum plaintiffs’ negligence, breach of fiduciary duty, professional negligence, and negligent supervision claims. Instead, I direct the parties to exchange discovery related to whether or not the Targum plaintiffs were clients of Citrin, and invite the parties to remake their summary judgment motions at the close of discovery. Additionally, I decline to rule on the issue of the scope of the alleged duty and foreseeability until I determine that a duty actually exists Finally, to the extent that the Targum plaintiffs oppose Citrin’s motion on the ground that they have a negligence and accounting malpractice claim against Citrin because, after the plaintiffs learned of Weber’s theft, Citrin failed adequately and promptly to respond to their document requests, I note that the Targum plaintiffs have not asserted that claim in their complaint.”