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CORPORATE GOVERNANCE and OFFICER / DIRECTOR / AUDITOR LIABILITY

Corporate governance related issues frequently play a central role in high-stakes commercial litigation, particularly considering the ever-heightening scrutiny faced by boards and managers from investors and regulators such as the SEC.  Whether related to corporate transactions, incomplete or inaccurate disclosures, director independence, fiduciary duties, fraud/negligence, or other issues, BVA has the capabilities to rigorously analyze the situation and provide clear, persuasive expert testimony on often complex issues.  BVA’s experts bring a “real world” perspective to such matters, having served on, and advised countless companies, boards and committees, as well as having had extensive involvement in numerous corporate transactions.

The Situation: A government-sponsored enterprise alleged that a Big Four accounting firm should have detected material misstatements due to fraud in its audits of one of the nation’s largest privately held mortgage firms. The defendant argued that the fraud was sophisticated with widespread collusion, and implied that it was, therefore, undetectable.

The Action: On behalf of plaintiff, evaluated expert reports regarding detectability of the fraud. Explained the role of forensic procedures in audits and evaluated auditors’ compliance with AU 316 over multiple years. Determined that the fraud was not undetectable and that the auditors did not respond adequately to identified red flags.

The Situation: Regions Bank sought damages related to a $66 million loan to Color Star, a group of agricultural companies that grew a variety of indoor and outdoor plants for retail sale.  Lender plaintiffs alleged an accounting fraud.

The Action: Provided expert analysis and deposition testimony regarding (1) Color Star’s processes for counting and valuing physical inventory (live plants and materials), and (2) the adequacy of procedures performed by Color Star’s independent auditors to test inventory account balances.

The Situation: The SEC alleged that the CFO of a publicly traded touchscreen cover manufacturer failed to adequately disclose certain agreements as required under GAAP milestone accounting, and did so knowingly, with severe recklessness, or at least negligently.  The SEC sought over $1 million in disgorgement and penalties from the CFO.

The Action: On behalf of Defendant CFO, analyzed evidence to determine whether the CFO had exercised the degree of care that a reasonably prudent accountant would have exercised in the circumstances. Determined that the CFO had exercised an appropriate degree of care.  Issued an expert report and testified at deposition.