LA County sues CPA firm for alleged accounting fraud involving public funds News
LA County sues CPA firm for alleged accounting fraud involving public funds

Los Angeles County [official website] on Friday filed suit [complaint, PDF] against Vazquez & Company, LLP [official website], a CPA firm, alleging that the firm defrauded the county by failing to detect the embezzlement of $9 million committed by the firm’s client, Chicana Service Action Center (CSAC). The complaint alleges that from 2009 to 2012, Vazquez & Co. audited CSAC and failed to address the the issues with CSAC’s inappropriate use of public money including: paying for a $8,500 yacht trip for a Vazquez & Co. partner, personal rent payments, credit card payments, car payments, lobbying expenses, etc. Specifically, the complaint alleges, among other things, that the defendants “provided the Reports with no reasonable ground for believing them to be true in that each of defendants knew that they omitted relevant information, contained factual inaccuracies and were misleading.” Additionally, the complaint alleges that the auditing firm gave CSAC a fraud questionnaire and failed to follow up when CSAC gave inadequate responses. The auditing firm admitted that they would simply take the CSAC executives’ explanations at face value without conducting further inquiries. Among the causes of action against Vazquez & Co. are fraud and negligent misrepresentation.

Fraud has been an issue in the corporate world for a long time and shows no signs of going away anytime soon. An April EY report [JURIST report] revealed that there are persistent levels of fraud and unethical conduct plaguing international business. In March, Volkswagen plead guilty [JURIST report] to DOJ charges of fraud, obstruction of justice, and falsifying statements in relation to their practice of installing technology on cars that would circumvent emissions tests. In February, the DOJ joined in a lawsuit [JURIST report] against United Health Group alleging that they were defrauding the Medicare program by overcharging the program and claiming their members were treated for conditions that never existed. The same month, former American International Group [corporate website] (AIG) CEO Maurice Greenberg former CFO Howard Smith agreed to settle accounting fraud charges [JURIST report], admitting that they signed off on the company’s financial statements filed with the SEC between 2000 and 2003 fully aware of the financial impact of the two sham reinsurance transactions (Capco and Gen Re) that the company entered into in 2000. In January, Western Union paid $586 million [JURIST report] after admitting that they turned a blind eye to criminals who used their services for fraud and money laundering.