$36.5 million fraud judgment against accounting firm.$36.5 MILLION FRAUD JUDGMENT AGAINST ACCOUNTING FIRM A Houston, Texas “Houston” redirects here. For other uses, see Houston (disambiguation). Houston (pronounced /'hjuːstən/) is the largest city in the state of Texas and the , jury ruled that Laventhol and Horwath violated vi·o·late tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates 1. To break or disregard (a law or promise, for example). 2. To assault (a person) sexually. 3. rule 10b-5 of the Securities Exchange Act of 1934 and engaged in common law fraud in performing audit and tax services for a series of limited partnership. A judgment of over $36 million was levied against the accounting firm. Approximately 1,000 investors put more than $40 million in a series of limited partnerships started by Herman Finesod of New Jersey. Finesod claimed he had purchased the rights to a new drilling product that would recover previously unrecoverable crude oil. The product was never developed. The investors alleged that instead of using the $40 million for product development, the promoter A person who devises a plan for a business venture; one who takes the preliminary steps necessary for the formation of a corporation. Promoters are the people, who, for themselves or on behalf of others, organize a corporation. placed their money in a Swiss bank account to ensure the funds would be outside the jurisdiction of U.S. courts. In addition to Laventhol and Horwath, there were 29 other named defendants; however, Laventhol was the one not to settle before trial. The investors alleged Laventhol prepared tax forms that listed over $30 million in fees paid to the promoter as "reasonable business expenses associated with the development of this new product." Additionally they alleged Laventhol allowed itself to be classified as a sales consultant in promotional materials and classified the partnership as a development stage company in its audit financial statements when, in fact, no product was being developed. After the verdict, Laventhol filed a motion asserting as·sert tr.v. as·sert·ed, as·sert·ing, as·serts 1. To state or express positively; affirm: asserted his innocence. 2. To defend or maintain (one's rights, for example). the right of contribution (to help pay the judgment) from the 29 defendants who settled before the trial. Senior U.S. District Judge Milton Pollack Milton Pollack (September 29, 1906–August 13, 2004) was a longtime federal judge in New York City. Pollack was born in New York and obtained his bachelors and law degrees from Columbia University and Columbia Law School. In 1967, President Lyndon B. denied this motion and ruled the total judgment of $37,719,000 could be offset only by the $1,144,000 in settlement funds paid by the other defendants before the trial. The investors' counsel also said he would seek at least $20 million in prejudgment pre·judge tr.v. pre·judged, pre·judg·ing, pre·judg·es To judge beforehand without possessing adequate evidence. pre·judg interest and attorneys' fees and to have the judgment trebled under the provisions of the Racketeer Influenced Corrupt Organizations Racketeer Influenced Corrupt Organization (RICO) statute n. a federal law which makes it a crime for organized criminal conspiracies to operate legitimate businesses. Act. Laventhol's general counsel said the firm believes the case will be overturned on appeal. (Westheimer v. Finesod, U.S. District Ct. Southern District of Texas, no. H-86-3808) |
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