It’s an age-old story.  Trusted assistant embezzles money to pay for private life style, while trusting principal serenely depends on accountants, banks and others to protect him.  Naturally, it all goes wrong.  Weiser v Citigroup, Inc.     2018 NY Slip Op 31381(U)  June 25, 2018  Supreme Court, New York County  Docket Number: 655851/16  Judge: Nancy M. Bannon is the story of who might be at risk.

“Weiser is a physician and the principal of the PC, which owns and operates a medical practice. Strows served as bookkeeper of the PC for several years, and was a friend of Weiser’s family. Weiser, in his capacity as principal of the PC, reposed trust in and relied upon Strows to faithfully manage the PC’s books, records, and accounts, and relied on her representations that the credits and debits to the PC’s bank accounts were properly made only with respect to the PC’s actual obligations and receivables.

Beginning in 2009, without the plaintiffs’ permission or knowledge, Strows drafted a total of 132 checks on the PC’s business checking account and Weiser’s personal checking account, both of which were maintained with the Citibank defendants, and made them payable to her personal creditors, including Citigroup and CCSI, which respectively issued her credit card and managed
her credit card account. Strows concealed this conduct from them by representing to Weiser that the checks were to pay legitimate debts of the PC, as well by making entries on the checks after
Weiser signed them, referencing her personal credit card and utility accounts, and concealing the true purpose of the payments in the plaintiffs’ books and records.”

“Ross Perry and his accounting practice, Ross D. Perry CPA, P.C. (together the Perry defendants) ,-as well as the defendant Hecht & Associates, LLP (Hecht), provided accounting, auditing, and oversight services to the PC from 2009 to 2016. “Perry, who was responsible for monitoring and auditing finances relating to Dr. Weiser’s professional and personal accounts and who regularly interacted with Strows took no steps to detect or prevent Straws’ theft or notify Dr. Weiser of Strows’ malfeasance.” (emphasis added). Perry routinely interacted with Strows and used worksheets and ledgers she prepared as part of his rendering of agreed-upon accounting and tax preparation services to the plaintiffs, but “Perry . . failed to discover Strows’ multiple and repeated defalcations and alert Dr. Weiser at any time to the fraud.”

Accounting malpractice “contemplates a failure to exercise due care and proof of a material  deviation from the recognized and accepted professional standards for accountants and auditors,
. which proximately causes damage to plaintiff.” Town of Kinderhook v Vona, 136 AD3d 1202, 1204 (3rct Dept. 2016); see D.D. Hamilton Textiles, Inc. v Estate of Mate, 269 AD2d 214 (1st Dept.
2000); Herbert H. Post & Co. v Sidney Bitterman, Inc., 219 AD2d 214 (1st Dept. 1996)
Perry moves to dismiss the second amended complaint against him on the ground that the one cause of action asserted against him, alleging professional malpractice, fails to state a cause of
action. In his affidavit, Perry does not assert that he did not deviate from accepted accounting standards, or that any such deviation was not a proximate cause of the plaintiffs’ alleged losses. Rather, he asserts only that he was not expressly retained by the plaintiffs, in writing or otherwise, that he only participated in the preparation and corporate and personal tax returns based upon cash disbursement sheets prepared by Strows, and that he was in no way involved any auditing or compilation services for the plaintiffs. Perry thus avers that he had no occasion or obligation to review checks, bank statements, or any other documents that might have suggested malfeasance on the part of Strows. Perry’s attorney, in his affirmation, limits the  basis for dismissal to the ground that “case law in the State of New York is uniform to the effect that an accountant in the position of Mr. Perry has no legal liability for such transactions or for any damages as claimed by the plaintiff[s] in this matter.”

“Although Perry asserts in his affidavit that he was not retained to, and in fact did not, provide auditing services to the plaintiffs, the plaintiffs’ pleading clearly asserted that he was retained for that purpose. Moreover, the allegations in the second amended complaint, as set forth above in detail, clearly set forth facts sufficient to place Perry on notice that, in providing oversight and auditing services, he deviated from good accounting practice in failing to review cancelled checks or
fully review bank account records, and that said deviation proximately prevented the plaintiffs from stanching the loss of funds occasioned by Strows’s misconduct. ”

 

Print:
EmailTweetLikeLinkedIn
Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.