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.