A judgment has been entered against Grant Thornton LLP, a large Chicago-based accounting firm, in the amount of $99 million. The judgment arose from a fraud lawsuit brought by a Kentucky family that owns dozens of hotels and more than a half-dozen casinos around the country. Last month, Circuit Judge Patricia Summe found that the accounting firm was negligent in the way it handled taxes for William J. Yung and his family. Yung is the owner of Columbia Sussex, a Crestview Hills-based hotel company.
Judge Summe ordered Grant Thornton to pay William and Martha Yung $4.7 million in compensatory damages and $55 million in punitive damages, as well as pre-judgment interest on $900,000 at a rate of 12 percent from June 11, 2007, to the day of the ruling. Grant Thornton was also ordered to pay the 1994 William J. Yung Family Trust $14.6 million in compensatory damages and $25 million in punitive damages.
It was contended that Grant Thornton, which handled the Yung family’s finances from 1996 through 2007, was selling products knowing that they were not legal and would not survive scrutiny by the Internal Revenue Service (IRS). Judge Summe found that Grant Thornton intentionally misled the Yungs about various financial instruments and their taxes. The result was the Yungs settling tax liabilities with the IRS for $18.4 million in taxes, fines and fees. Judge Summe wrote in a 300-page decision:
The infliction of economic injury is clear in this case not only as to taxes, interest and penalties, but as to the reputation of Yung individually as a businessperson and as a shareholder, especially when done intentionally through affirmative acts of misconduct. Therefore these actions can warrant a substantial penalty.
Kevin Murphy, the lawyer who represented Yung and his family, said in a statement that in the late 1990s numerous accounting firms began selling “tax strategies,” which included a letter that gave the opinion of the legality of the tax strategy. Murphy called Grant Thornton’s actions “unconscionable,” saying:
Multiple families around the United States suffered greatly as a result of Grant Thornton’s actions. What they knew at the time they sold this ‘strategy’ and what they told their customers were two very different things.
Yung, through Columbia Sussex of Crestview Hills, Ky., operates 41 hotels under eight different brands, including Marriott, Crowne Plaza and Hilton hotels. Yung also has a stake in casinos in Louisiana, Mississippi, Nevada and the Caribbean island resort of Saint Maarten. Grant Thornton says it will appeal.
Source: Insurance Journal
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