Accountancy firm sued over audits for investment firms who fell victim to Madoff Ponzi scheme
The liquidators of two foreign investment firms which were found to be insolvent after jailed fraudster Bernie Madoff’s Ponzi scheme was discovered are suing accountants in Ireland who audited their books for two years.
It is claimed, in High Court proceedings, that Deloitte and Touche failed to conduct the audits in accordance with proper standards
British Virgin Islands (BVI) registered mutual fund, Mount Capital Fund Ltd (MCF), and its subsidiary Mount Capital Asset Subsidiary Ltd (MCAS), were found to be insolvent after the Ponzi scheme was revealed, it is claimed.
Investments in MCF were in turn invested in MCAS after which a third-party investment manager directed the investment strategy which placed funds in Bernard L MadoffInvestment Securities LLC.
Madoff's firm had engaged in a $65 billion (€57.5bn) Ponzi type investment scam that evaded detection of decades.
After Madoff (now 80) was jailed in America for 150 years in June 2009, MCF and MCAS were liquidated in the BVI September 2009.
In 2013, BVI joint liquidators, Hadley J Chilton and John Greenwood, sued Deloitte and Touche here over its role as auditor of the firms in 2006 and 2007.
It is claimed, among other things, the defendant failed to allocate sufficient resources to each audit. It allegedly failed to detect that the principle asset of MCAS - with a stated value of €263m in 2006 and €393m in 2007 - did not exist or did not exist in those amounts.
It is claimed the defendant failed to apply a properly considered approach to each audit and failed to consider and evaluate the extent to which information produced by the Madoff company could be relied upon.
It is claimed the records prepared by the Madoff firm could not on their own properly constitute an independent source of evidence for audit purposes.
It is further claimed there was a failure to test of a sample of alleged purchase and sales of securities and equities and/or alleged dividend income. MCAS' assets comprised US Treasury Bills, it is claimed.
Deloitte and Touche deny the claims.
A dispute between the parties over discovery of documents in advance of the trial came before Mr Justice Charles Meenan.
Today Mr Justice Meenan directed the defendant make discovery in relation to two categories of documents in relation to the audit file.
He directed the plaintiffs also make discovery in relation to two categories of documents.
The full case will be heard later.
