Notable Cases
Auditing & Accounting Failure



GUNDERSON V. KUEBLER, et. al.

Superior Court of California, San Diego
Henry Stotsenberg served as plaintiff’s testifying expert on professional negligence and economic damages in the approximate amount of $10 million

Case settled following expert deposition testimony.

Henry Stotsenberg opined on whether defendant breached the standard of care for tax preparers and his duty to his client (plaintiff) regarding the under reporting of $37 million in taxable income that resulted in the filing of felony charges by the FTB against plaintiff/client, and whether defendant enter into a undisclosed referral fee arrangement with plaintiff’s tax attorney that compromised defendant’s duty to plaintiff in violation of California Board of Accountancy Rules and Regulations.

CAST ART INDUSTRIES, LLC against KPMG, LLP

Superior Court of New Jersey
Henry Stotsenberg served as plaintiff’s testifying expert on professional negligence.

Jury found professional negligence against defendant and awarded plaintiff $41 million.

This case involved the fraudulent reporting of revenue by a leading manufacturer in the giftware industry that was audited by defendant prior to its acquisition by plaintiff. Stotsenberg Consulting identified the primary audit failure issues and the insufficiency of the audit evidence supporting those issues. Stotsenberg Consulting forensically examined defendant’s audit procedures including four years of audit work papers, and defendant’s internal policies, procedures, guidance, training related documents, and auditors’ deposition testimony.

MATTCO FORGE, INC. v. ERNST & YOUNG

Superior Court of California, Los Angeles
Henry Stotsenberg was the testifying expert for plaintiff on professional negligence and economic damages

Jury found professional negligence against defendant and awarded plaintiff $42 million.

The plaintiff, a jet engine parts manufacturer, hired defendant to perform accounting services and damage calculations in its case against General Electric. Stotsenberg Consulting determine whether defendant’s damages calculations were appropriate by forensically examining defendant’s work papers and its foundation, basis, support and procedures used for its damages study.

VITESSE SEMICONDUCTOR CORPORATION v. KPMG LLP/h4>

Superior Court of California, Los Angeles
Henry Stotsenberg served as plaintiff’s consulting expert on professional negligence and stock options backdating.

Case settled in plaintiff’s favor for $22.5 million following the presentation by Henry Stotsenberg of Stotsenberg Consulting’s confidential mediation report before a retired judge mediator.

This case involved the improper recognition of backdated stock options in the amount of $268 million and revenue in the amount of $37 million involving the former officers of plaintiff, an electronics company, that was audited by defendant. Stotsenberg Consulting identified the primary audit failure issues and the insufficiency of the audit evidence supporting those issues including the forensic examination of 32,000 pages and 10 years of defendant’s audit work papers.

TARGUS GROUP INTERNATIONAL INC. v. KPMG LLP

Superior Court of California, Orange County
Henry Stotsenberg served as a plaintiff’s consulting expert on professional negligence.

The WSJ reported that the case settled in plaintiff’s favor for $26 million.

Plaintiff, a worldwide manufacturer of soft goods, was audited by defendant during the time plaintiff’s CFO embezzled $26 million. Stotsenberg Consulting identified the primary audit failure issues and the insufficiency of the audit evidence supporting those issues including the forensic examination of four years of defendant’s audit work papers, internal audit manuals and deposition transcripts.

FREDERICKS OF HOLLYWOOD v. ARTHUR ANDERSEN LLP

Superior Court of California, Los Angeles
Henry Stotsenberg served as plaintiff’s testifying expert on professional negligence.

Jury found professional negligence.

Plaintiff, a national specialty-clothing retailer, was audited by defendant prior to its acquisition by an investment group. Stotsenberg Consulting identified “going concern” issues prior to acquisition as the primary audit failure issue and the insufficiency of the audit evidence supporting that issue including the forensic examination of four years of audit work papers.

PIPEVINE, INC v. GRANT THORNTON LLP

Superior Court of California, San Francisco
Henry Stotsenberg served as plaintiff’s testifying expert on professional negligence and economic damages.

Case settled following expert deposition testimony.

During the time of defendant’s audit of plaintiff, a major non-profit charitable organization, there was the wrongful diversion of $18 million in charitable contributions. Stotsenberg Consulting identified the primary audit failure issues and whether defendant’s audit evidence was sufficient including the forensic examination of four years of defendant’s audit work papers, internal audit manuals and deposition transcripts.

CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM v. ARTHUR ANDERSEN LLP, QWEST COMMUNICATIONS, et. al.

Superior Court of California, San Francisco
Henry Stotsenberg served as a plaintiff’s consulting expert on professional negligence.

Case settled.

This case involved the improper recognition and restatement of $2 billion of revenue of a large telecommunications carrier. Stotsenberg Consulting forensically examined thousands of documents for objective evidence that would have been required before there could have been a proper interpretation of GAAP by defendant.

ENDOCARE, INC. v. KPMG, LLP

Superior Court of California, Orange
Henry Stotsenberg served as plaintiff’s consulting expert on professional negligence.

Matter settled.

Notable Cases
Forensic / Damages Studies



BRISTOL TECHNOLOGY, INC. v. MICROSOFT CORPORATION

US District Court, Connecticut
Henry Stotsenberg served as plaintiff’s testifying expert at trial on anti-trust damages in the amount of $263 million.

Case settled after trial before final judgment was entered. Damages were not considered by the jury since the jury cleared defendant of anti-competitive behavior.

Plaintiff was a cross platform software developer. In this antitrust case, Stotsenberg Consulting studied the damages resulting from the software company’s expansion into high-end workstations and office servers.

BOURNS, INC. v. RAYCHEM CORPORATION

United States District Court for theCentral District of California
Henry Stotsenberg served as the testifying expert on antitrust damages for plaintiff.

Jury awarded plaintiff $64 million, before trebling. $192 million after trebling.

Plaintiff is a global manufacturer of electronic components and defendant is a billion dollar global provider of engineered electronic components. In this antitrust/patent fraud action, Stotsenberg Consulting studied the damages relative to the basic patents covering cutting-edge technology for resettable fuses known as polymeric positive temperature coefficient devises (PPTCs).

CEIMO v. PAUL REVERE LIFE INSURANCE COMPANY and PROVIDENT LIFE INSURANCE COMPANY

The United States District Court For the District Of Arizona
Henry Stotsenberg served as plaintiff’s testifying financial expert relative to damages and the overall financial benefit from a substantial change in defendants’ claims practices.

Jury awarded plaintiff $5.4 million in compensatory damages and $79 million in punitive damages.

Stotsenberg Consulting identified the financial data, information and trends that were consistent with bad faith claims denial practices, and quantified the resulting economic benefit to the insurance companies. This included an extensive forensic examination of defendants’ public financial and accounting filings and other documents for the years 1975 through 1999.

ES ENERGY SOLUTIONS, LP et al v. BLUFF POWER PARTNERS LP et al

District Court, Dallas, Texas
Henry Stotsenberg served as cross-defendants’ testifying damages expert solely to rebut the basis for cross-complainants’ claim for $68 million of “Pratt” damages.

The jury found liability in favor of cross-complainants, but found no Pratt damages.

Stotsenberg Consulting measured the economic value of one of the largest landfills in the United States including the recovery, processing and selling of landfill (methane) gas to Pratt under a 30 year contract. Stotsenberg Consulting’s work included assessing the economic value of the landfill’s gas recovering and processing operations and the examination of cross-complainants’ expert’s measurement of damages.

MIAMI CIGAR v. UNITED STATES TOBACCO INTERNATIONAL, et. al.

Miami-Dade Circuit Court, Florida
Henry Stotsenberg served as plaintiff’s testifying expert on economic damages for breach of contract and tortious interference.

Jury awarded plaintiff $42 million.

Plaintiff, a major US cigar distributor sued US Tobacco for breach of contract and tortious interference in the distribution of premium cigars throughout the United States. Stotsenberg Consulting’s work included an extensive examination of accounting records, premium cigar manufacturing and distribution in the United States, and the import of cigars into the United States.

TRI-COUNTY BUILDERS v. TRUCK INSURANCE EXCHANGE

Superior Court of California, Los Angeles
Henry Stotsenberg served as the testifying expert for plaintiff relative to damages and the financial ability of Truck Insurance Exchange to pay punitive damages.

Jury awarded plaintiff $2 million in compensatory damages and $40 million in punitive damages.

This case involved assessing a major insurance company’s ability to pay punitive damages including the upstream of funds to its ultimate parent. Stotsenberg Consulting’s study involved an extensive search for and the obtaining of numerous public domain financial documents, and a five-year forensic analysis of defendant’s financial structure and operating results.

CATES CONSTRUCTION/TIG INSURANCE COMPANY v. TALBOT PARTNERS

Superior Court of California, Los Angeles
Henry Stotsenberg served as the testifying expert on financial forensics and economic damages for defendant and cross-complainant.

Jury awarded defendant and cross-complainant $28 million.

In this case of a real estate developer and its case against a major insurance company, Stotsenberg Consulting did the tracing and accounting for millions of dollars of construction funds. Stotsenberg Consulting also analyzed the financial structure and operating results of the insurance company and how certain financial indicators were consistent with bad faith claims denial practices.

FOR INDIVIDUAL HEIRS OF A CEMETERY LAND CONTRACT

Superior Court of California, Los Angeles
Henry Stotsenberg served as the testifying financial forensic and economic damages expert for certain individual heirs of a cemetery land contract in their suit for wrongful accounting.

Case settled for $23 million.

Stotsenberg Consulting forensically examined 128,000 grave site and mortuary service contracts of one of the largest cemetery facilities in the United States.

COMPUTER SCIENCES CORP. vs. CHILDRENS HOSPITAL LOS ANGELES

AAA Commercial Arbitration Tribunal
Henry Stotsenberg served as the defendant and counterclaimant hospital’s testifying expert on forensic accounting and economic damages including rebuttal testimony.

Arbitration panel rejected plaintiff’s claim of $14 million in damages and awarded defendant and counterclaimant Childrens Hospital approximately $2 million in damages.

Stotsenberg Consulting conducted an extensive examination of hundreds of documents to determine the validity of $30 million in billings by plaintiff, a Fortune 500 computer services corporation, for the design and implementation of a computer software system for defendant, a major non-profit hospital.

COUNTY OF SAN BERNARDINO v. JAMES J. HLAWEK, et. al.

Superior Court of California, Ventura
Henry Stotsenberg served as the testifying forensic accounting expert for plaintiff in its fraud and bribery case against the county’s Chief Administrative Officer and several other top county officials and individuals and companies.

Judge awarded plaintiff $10.6 million.

Stotsenberg Consulting’s work included extensive and detailed tracing of funds in and out of a many different defendants’ individual and company bank accounts.

GRAND WAILEA COMPANY v. HYATT CORPORATION

U.S. District Court of Hawaii
Henry Stotsenberg served as the forensic accounting expert for the defendant, Hyatt.

Case settled following Stotsenberg Consulting’s expert report.

Stotsenberg Consulting conducted an extensive forensic examination thousands of documents and accounting records of the hotel operator and the resort owner of a major resort complex in Hawaii that were relevant to vendor rebates, commissions and fees covering numerous years.

TOKYO GREEN CO. v. THE INDUSTRIAL BANK OF JAPAN

Circuit Court of Hawaii
Henry Stotsenberg served as the forensic accounting testifying expert for the plaintiff (counterclaim defendant).

Litigation ended following Henry Stotsenberg’s expert report.

Stotsenberg Consulting conducted a study of the use of over $100 million in funds for golf course development.

EPIC RESORTS, LLC v. PRUDENTIAL SECURITIES. INC., PRUDENTIAL FINANCIAL, PRUDENTIAL CREDIT CORP

US District Court, Pennsylvania
Henry Stotsenberg served as the forensic accounting and economic damages expert for plaintiff in its $46 million damages claim against defendant.

Case settled following the issuance of Stotsenberg Consulting’s Rule 26 expert report.

This case involved the breach of a $100 million credit and securitization agreement between plaintiff, an international resort timeshare developer, and defendant, a major insurance conglomerate.

COLUMBIA TRISTAR HOME VIDEO, INC vs. CINETEL, et. al.

Superior Court of California, Los Angeles
Henry Stotsenberg served as the forensic accounting and economic damages expert for the plaintiff and cross-defendant, a subsidiary of Sony Pictures.

Case settled.

Plaintiff filed a multi-million dollar breach of contract, fraud and diversion of funds complaint against defendant, an independent movie producer. Issues involved the financing, production and marketing of 21 films for theatrical (domestic and international) and video release.

TRIPLE NET PROPERTIES, LLC v. CORE REALTY HOLDINGS, LLC

US District Court, California
Henry Stotsenberg served as defendants’ expert regarding plaintiff’s claim of unjust enrichment and for the disgorgement of profits.

Case settled after Stotsenberg Consulting’s Rule 26 expert report was submitted.

Stotsenberg Consulting conducted a study of the approximately $1 billion in capital raised by both plaintiff and defendant and the resulting economic gain to defendant and loss by plaintiff. Stotsenberg Consulting’s study included the examination of filings with the Securities and Exchange Commission relative to Plaintiff, and internal documents and accounting records produced by plaintiff and defendant.

WHITTIER TRUST DISPUTE

Stotsenberg Consulting served as the forensic accounting and economic damages experts for a lifetime income beneficiary.

Matter settled following the issuance of the Stotsenberg Consulting’s expert report.

This was a lifetime income beneficiary’s claim for breach of fiduciary duty against trustees. Stotsenberg Consulting’s study of the tens of millions of dollars in several trusts and other entities including damages in the approximate amount of $30 million. Stotsenberg Consulting examined over 400 financial documents and 35 binders covering a ten year period.

AN ONLINE INTERNET COMPANY

Stotsenberg Consulting assisted an on-line internet company in defending a damages claim for the misappropriation of trade secrets and customer lists involving the buying of search engine advertising including keyword configurations through Google AdWords. Stotsenberg Consulting’s work included a study of revenues by examining and matching customer list data bases of 30,840 customer names and email addresses to 138,249 sales orders identified by customer numbers only and representing 56,664 email addresses.