It’s an age-old story.  Trusted assistant embezzles money to pay for private life style, while trusting principal serenely depends on accountants, banks and others to protect him.  Naturally, it all goes wrong.  Weiser v Citigroup, Inc.     2018 NY Slip Op 31381(U)  June 25, 2018  Supreme Court, New York County  Docket Number: 655851/16  Judge: Nancy M. Bannon is the story of who might be at risk.

“Weiser is a physician and the principal of the PC, which owns and operates a medical practice. Strows served as bookkeeper of the PC for several years, and was a friend of Weiser’s family. Weiser, in his capacity as principal of the PC, reposed trust in and relied upon Strows to faithfully manage the PC’s books, records, and accounts, and relied on her representations that the credits and debits to the PC’s bank accounts were properly made only with respect to the PC’s actual obligations and receivables.

Beginning in 2009, without the plaintiffs’ permission or knowledge, Strows drafted a total of 132 checks on the PC’s business checking account and Weiser’s personal checking account, both of which were maintained with the Citibank defendants, and made them payable to her personal creditors, including Citigroup and CCSI, which respectively issued her credit card and managed
her credit card account. Strows concealed this conduct from them by representing to Weiser that the checks were to pay legitimate debts of the PC, as well by making entries on the checks after
Weiser signed them, referencing her personal credit card and utility accounts, and concealing the true purpose of the payments in the plaintiffs’ books and records.”

“Ross Perry and his accounting practice, Ross D. Perry CPA, P.C. (together the Perry defendants) ,-as well as the defendant Hecht & Associates, LLP (Hecht), provided accounting, auditing, and oversight services to the PC from 2009 to 2016. “Perry, who was responsible for monitoring and auditing finances relating to Dr. Weiser’s professional and personal accounts and who regularly interacted with Strows took no steps to detect or prevent Straws’ theft or notify Dr. Weiser of Strows’ malfeasance.” (emphasis added). Perry routinely interacted with Strows and used worksheets and ledgers she prepared as part of his rendering of agreed-upon accounting and tax preparation services to the plaintiffs, but “Perry . . failed to discover Strows’ multiple and repeated defalcations and alert Dr. Weiser at any time to the fraud.”

Accounting malpractice “contemplates a failure to exercise due care and proof of a material  deviation from the recognized and accepted professional standards for accountants and auditors,
. which proximately causes damage to plaintiff.” Town of Kinderhook v Vona, 136 AD3d 1202, 1204 (3rct Dept. 2016); see D.D. Hamilton Textiles, Inc. v Estate of Mate, 269 AD2d 214 (1st Dept.
2000); Herbert H. Post & Co. v Sidney Bitterman, Inc., 219 AD2d 214 (1st Dept. 1996)
Perry moves to dismiss the second amended complaint against him on the ground that the one cause of action asserted against him, alleging professional malpractice, fails to state a cause of
action. In his affidavit, Perry does not assert that he did not deviate from accepted accounting standards, or that any such deviation was not a proximate cause of the plaintiffs’ alleged losses. Rather, he asserts only that he was not expressly retained by the plaintiffs, in writing or otherwise, that he only participated in the preparation and corporate and personal tax returns based upon cash disbursement sheets prepared by Strows, and that he was in no way involved any auditing or compilation services for the plaintiffs. Perry thus avers that he had no occasion or obligation to review checks, bank statements, or any other documents that might have suggested malfeasance on the part of Strows. Perry’s attorney, in his affirmation, limits the  basis for dismissal to the ground that “case law in the State of New York is uniform to the effect that an accountant in the position of Mr. Perry has no legal liability for such transactions or for any damages as claimed by the plaintiff[s] in this matter.”

“Although Perry asserts in his affidavit that he was not retained to, and in fact did not, provide auditing services to the plaintiffs, the plaintiffs’ pleading clearly asserted that he was retained for that purpose. Moreover, the allegations in the second amended complaint, as set forth above in detail, clearly set forth facts sufficient to place Perry on notice that, in providing oversight and auditing services, he deviated from good accounting practice in failing to review cancelled checks or
fully review bank account records, and that said deviation proximately prevented the plaintiffs from stanching the loss of funds occasioned by Strows’s misconduct. ”