This slipped by us last week, but after noting last Thursday morning that a lawsuit against Baker Tilly for $327 million was nearing its end, we found this story from late on Thursday reporting that BT had lost the suit to Aqua Finance.
Aqua Finance accused its former accounting and advising firm of negligence and breach of contract. Aqua Finance attorneys asked jurors to award up to $327 million. Aqua Finance's attorneys argued that Baker Tilly and its partner who managed Aqua Finance's account, Kevin Prather, withheld that the Wausau company's loan losses were improperly calculated and did not meet industry standards, according to court records. Baker Tilly's attorneys say the company's losses were because of the economy, not accounting errors.
Baker Tilly's attorneys didn't comment for the article.
On the surface, this could be a little problematic for Baker Tilly who had a reported $238 million in revenues for 2011. If you don't have a 10-key handy, the award of $50 million is over 20% of those revenues. That's...that's not good. Back to that in minute. As for the partner in question, according to his LinkedIn profile, Mr. Prather is a eight year veteran of the firm and his name was all over this complaint:
Prather announced in February 2008 that Aqua Finance's loan loss reserves were not conducted in accord with industry standards since Jan. 1, 2005, and the company's loan loss reserves must be increased by $20 million, according to a complaint filed in court. Prather later said that he discovered the problem one year earlier, but had not reported it to Aqua Finance. Baker Tilly withdrew from its agreement to complete Aqua Finance's 2007 audit until after the company resolved its loan reserve issue. Aqua Finance downsized from 380 employees in January 2008 to 97 employees in February 2011 as it struggled to obtain credit and lost potential customers, according to court records. Jurors on Thursday found that Baker Tilly was negligent in waiting one year to disclose information about problems with Aqua Finance's reserves. Jurors also determined that Baker Tilly was negligent in its handling of Aqua Finance's 2007 audit and its decision to not complete it.
For good measure, the jury also found that BT was negligent for not completing the 2007 audit. The jury did not find Mr. Prather negligent.
But back to the firm - It stands to reason that BT will appeal - that'll be expensive - and it certainly has professional liability insurance, but it's not immediately
konw known how much of that will cover the award or if this constitutes a long-term financial dilemma for the firm. We sent an after-hours email to Baker Tilly CEO Tim Christen asking many of these question but it was not immediately returned. We'll let you know if we hear back.
In the meantime, if you're a BT employee or someone in the know, email us with any information or discuss below.