Wednesday, July 23, 2014

Secretary Of State's Securities Division Recovers Impressive Sum From Ponzi Schemer's Accounting Firm

Indiana Secretary of State Connie Lawson announced this week that her agency's security division had reached an agreement with an Indianapolis-based accounting firm, DeWitt & Shrader, to pay $1.8 million to settle a lawsuit her office brought against the firm for its work on behalf of convicted Ponzi schemer Keenan Hauke's Samex Capital Partners, LLC. That represents about 25% of the $7.1 million in restitution and most assuredly represents a significantly larger amount than the firm received for its work. Hauke was ordered to repay the $7.1 million as restitution to nearly 100 defrauded investors. Lawson's office had already returned over about $1 million to the investors that it has recovered from Hauke's remaining assets.

In sharp contrast, the bankruptcy trustee for Fair Finance recovered only $500,000 from Indianapolis-based Somerset CPAs for the work it performed on behalf of various business entities owned by convicted Ponzi schemer Tim Durham, who defrauded thousands of Ohio investors out of more than $200 million. That amount didn't even cover the amount of fees the accounting firm had been paid for its work over a several year period. Someret took over the accounting work after two separate accounting firms walked, finding too many discrepancies and problems with the companies' financials. An accountant for the resigning accounting firm wondered how Somerset could issue "a clean opinion on Fair" after the "serious issues" he had uncovered.

After federal authorities convicted the Illinois city of Dixon's former comptroller, Rita Crundwell, of embezzling $54 million from the city over a 20-year period, attorneys for the city went after two accounting firms that performed audit work for the city during that period to recover some of the losses. Clifton Larson Allen agreed to repay the city more than $35 million for its failure to uncover the theft. Another local accounting firm in Dixon, Janis Card Associates, agreed to repay the city $1 million. Fifth Third Bank also agreed to repay the city $3.85 million for its failure to detect anything wrong as it processed numerous wire transfers from government accounts into Crundwell's personal bank accounts.

Brian Bash's work as bankruptcy trustee on behalf of the defrauded Fair Finance investors leaves much to be desired. He has recovered so far less than 5% of the amount investors lost in Durham's Ponzi scheme. Nothing has been returned to the investors because Bash's fees and expenses to date have consumed what little he has managed to recover. Many large judgments he obtained against Durham and his business partners will likely never be recovered as they rot the rest of their lives away in a federal prison.

1 comment:

Anonymous said...

I wonder if the Durham trustee looks at IndianaUnclaimed.gov under Durham and etc. Looks like Tim is owed some $!!!