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Goodman & Company, LLP's Attempt to Stay Legal Action Denied.

Lawsuit Claims Goodman Conspired to Provide False Audit Opinion Depriving Shareholders of Tens of Millions of Dollars

FAIRFAX, Va. -- The Fairfax County Circuit Court of Virginia has denied public accounting firm Goodman & Company, LLP's motion to stay a lawsuit filed by Costa Brava Partnership, III, L.P. The lawsuit alleges claims for conspiracy, tortious interference with contractual relations, and aiding and abetting breach of fiduciary duties. The denial of Goodman's motion clears the way for discovery to begin following two motions by Goodman to dismiss the lawsuit. The lawsuit seeks at least $51 million dollars in compensatory, treble and punitive damages.

In December 2005, Costa Brava filed suit against Goodman in connection with its audit opinion of Telos Corporation's 2004 annual report. The suit alleges that Goodman's clean audit opinion is false and the lawsuit further alleges that Goodman's audit opinion was the centerpiece of a carefully calculated campaign to deprive Costa Brava, and other holders of Telos's public redeemable securities, of millions of dollars. Specifically, Goodman is alleged to have knowingly certified that Telos's 2004 annual report complied with Generally Accepted Accounting Principles, even though that annual report contains what Costa Brava contends is an intentionally material misclassification of Telos's obligation to redeem its public securities in December 2005 as a "long term obligation" (one that need not have been paid in 2005) rather than as a short term obligation. The lawsuit further alleges that Goodman's audit opinion is false in respect to Telos's significant understatement of the total value of its obligation by more than $30 million.

The lawsuit further alleges that, in two letters to Goodman preceding this legal action, Costa Brava advised Goodman that Telos's 2004 annual report contained what Costa Brava contends are serious accounting errors and asked Goodman to explain the basis for its clean audit opinion. Although Costa Brava publicly filed both letters with the Securities and Exchange Commission, Costa Brava received no response from Goodman.

About Costa Brava Partnership III, L.P.

Costa Brava is a Boston-based investment fund with investment partners located in Virginia and throughout the U.S.
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Publication:Business Wire
Date:Sep 27, 2006
Words:348
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