Eide Bailly Tries to Block Petters-Related Clawback
The aftermath of Tom Petters' $3.65 billion Ponzi scheme is far from over, and two recent lawsuits related to the scheme involve Fargo, North Dakota-based accounting firm Eide Bailly, LLP.
In order to protect itself from a potential clawback lawsuit stemming from Petters' scheme, Eide Bailly filed a preemptive suit against Doug Kelley, the receiver who is trying to recover funds lost in the scheme, according to a Star Tribune report.
The suit, filed in U.S. District Court in Minneapolis on Friday, reportedly asserts that Eide Bailly is not liable for damages for professional services it provided to Petters' business entities because it, too, was a victim of the fraud.
But a separate lawsuit filed Monday on behalf of Kelley accused Eide Bailly of malpractice in its relationship with the Petters business entities, Thousand Lakes and PAC Funding, the Star Tribune reports.
The Kelley suit reportedly alleges that Eide Bailly failed to examine or audit the inventory that Petters' businesses falsely claimed was stored in numerous warehouses. It alleges that the accounting firm reported $1.2 billion in inventory at the two companies when the actual balance was zero.
“Eide Bailly's opinions were integral in keeping the flow of money continuing for Tom Petters' Ponzi scheme,” Kelley told the Star Tribune.
But the Eide Bailly lawsuit reportedly contends that the firm was “tricked” and provided with “elaborately falsified records” when it conducted audit and review services for the two companies.
The accounting firm's suit also quotes Petters executive Deanna Coleman's courtroom testimony during the fraud trial in which she stated that she never told any outside auditors that the business was a fraud and misled them about the company's financial condition, according to the Star Tribune.
Eide Bailly's lawsuit reportedly alleges that attorneys for Kelley have said they will seek “unspecified damages in excess of $25 million.” But the Kelley lawsuit states no specific damage claim other than the return of $45,000 in professional fees paid to Eide Bailly, the Minneapolis newspaper reported.
Eide Bailly, which has offices in Minneapolis and Mankato, recently announced plans to merge with Milwaukee-based Wipfli, LLP, to form EB Wipfli, LLP. The two firms plan to eventually make the Twin Cities the headquarters of EB Wipfli.
To learn more about the lawsuits involving Eide Bailly, read the Star Tribune story here.