Do I need a lawyer or just my E&O people?

[Catherine]

Under the heading of no good deed going unpunished...

 

Former clients.  Small S-corp, two owners, now fighting.  One was the pro, the other did the books (incredibly poorly).  One who did the books might have been skimming (after they became former clients).  Will call them Pro and Books.  I was brought in by Pro whom I knew from a civic group.

 

When they came to me it was after the prior acctnt died.  His balance sheet was totally mucked up (apparently he had mild dementia problems in his last years). Books gave me startup paperwork that did NOT support the balance sheet from the first year's return so I had to make corrections for prior-year errors.  Then every year for 2 -3 years there was another twist on that first year.  Books would say "Oh, I forgot to tell you about the loan from my uncle," or  "Oh, don't you have the info on X; I thought I gave that to you?" etc.  So every year I was making prior-year corrections as new info came up from Books.  Pro never wanted to talk about the money side being too busy/didn't understand.  Until Pro wanted to know why Books got to deduct loss on 1040 but not Pro (suspended losses).  Told Pro that Books said Pro had no equity.  Turned out not to be the case but I never saw one bit of paperwork on Pro's equity.  I was *so* glad when they moved their accounting and tax work to a firm closer to their location, several years ago.

 

So now Pro has agreed to let Books buy them out but Books is wrangling for less money than is right (says Pro).  Pro tells me Books is trying to blame me for prior-year messes.  

 

Books has accountants (possibly) working for lawyers who want all my info on the case.  But I got rid of all my hardcopies some time ago (about a year after they became former clients), and the password in my notes to the ancient QB files does not open them.

 

My question is do I dare cooperate with Books' accountant firm, or do I hire an attorney pronto?  If the latter, anyone here have any recommendations for someone in MA?

 

I did speak with the accountant in very general terms (not using any client names) last Friday and have a brand-new, so-called "Section 7216 Disclosure" that in NO way, shape, or form, meets IRS requirements so I can stall on talking - for now.

 

As a total side-note, the business still owes me something like $2K and Pro about $500.  

 

Should have sold my practice last year....

[Margaret CPA in OH]

My recommendation is to call your E&O.  I have had two situations over the years that just might have given rise to an issue even if not a lawsuit and called about them.  In both cases, an advisor called me to discuss the particulars and gave great advice.  Nothing came of these issues but I felt so much better having someone else in my corner giving advice and prepared to support me.

Good luck!  I think I need to also reconsider how long I stick with these grandkids trusts.  I know one is being moved this year because the beneficiary has gotten so nasty.  I don't want 2 more years of her. 

[Cathy]

Catherine,

Be sure and tell your E & O company that the business still owes you approximately $2,000 and Pro about $500.  As you have not been paid for your work, do you legally have to give them any information?  I hate these situations with two owners. The ONLY 2 owners I will take on are a husband and wife team and have been thankful over the years as the ones I have sent down the road weren't worth the headache and, of course, didn't stay in business long.  Sometimes, even family will steal from each other, so I am very careful about which husband and wife team I will take also.  Please let us know how this turns out.  And if you need us for any drive-bys, we're here for you!  We'd we happy to drive by and wish you well!  

Take care,

Cathy

 

 

[FDNY]

While my legal education does not extend past Perry Mason and Judge Judy, please don't take this as legal advice.  But I feel compelled to give my opinion as I had a similar experience with H and W shareholders and it makes me angry seeing someone try to take advantage of a friend for their own gain, which is what Books is trying to  (blaming you for his carelessness, ignorance, and greed).

In my case I had all hard copies and notes, but as you say you had to make adjustments so wouldn't you be able to retrieve hard copies of the returns and amended returns if prepared?  From your synopsis it appears your memory is good so why not re create notes, and explanations, especially the reason for Pro not being able to deduct losses, from your knowledge of what Books was telling you and the continuous statements from Books of unreported loans and other items.  I don't think this is a violation of 230 as they are both questioning and answering the same situation, I don't see it as talking about one without the other's permission.

I think your being prepared will show them they are barking up the wrong tree..  Getting a consultation from an attorney and speaking with your E&O will give you good preparation as to what you might expect and what you should do.

Count me in for the drive by if needed, and let me know if you need me to call Brooklyn.  It's not you, it's them.

Good luck,

Bill

 

[Jack from Ohio]

If you can get Rita to give them each a hug, I have a client with a backhoe and a huge plot of forest land...

[RitaB]

When in doubt, hug it out.

[BulldogTom]

Look at the claws on that grey one?  Holy cow, they look like they can do some damage.

Catherine, I feel really bad for you.  I have no advice.  I really hope it plays out well for you.

Tom
Newark, CA

[Elrod]

Catherine,  When I closed my office after thirty five years, I had to walk away knowing that I probably will never see payment for some work performed.  I was surprised when the decency of some clients paid up.  I still never collected all due me, but I'll live with that. I only pray the client can.... Good luck Girl...

Hugs All Around..........

[Randall]

The only thing I would add is don't hire your own attorney.  How would you know who to call, what their experience is in these matters?  Contact E&O first, let them pick the attorney when and if one is necessary.

 

 

[Roberts]

I'd call the E&O and ask their opinion.

What on earth would they be coming after you to achieve? (legally?)

I absolutely hate the "Oh I thought I told you about that" storyline that people throw out after the fact. Had a client this year who had 2 years of screwed up tax returns. We walked through it this year, I asked tons of questions and explained it all when we did the return. His ex-wife is claiming he shouldn't have taken a deduction and the client is trying to blame me. He remembers me asking questions and him answering them but somehow he can't remember why he answered them truthfully.

[jklcpa]

I agree with calling the E&O to discuss.

I'm curious which one of the owners signed the returns each year after Books spun his additional stories? 

[Catherine]

Just now, jklcpa said:

 

I agree with calling the E&O to discuss.

I'm curious which one of the owners signed the returns each year after Books spun his additional stories? 

 

Books signed the returns.  

[BHoffman]

If Books and Pro are arguing over a sale price, the only thing that is important is the current fair market value.  That would have nothing to do with old records.  The succeeding accounting must any pertinent and timely information, not you.  Your information is so old that it cannot still have any relevance.

I would be very tempted to ignore everything about this unless served with a subpoena.  If that were to happen, then I'd contact E&O.  

Please don't lose any sleep over this.  The attorney fees start piling up and then 99.999% of the time they agree on some sort of settlement.

[TAG]

Catherine,

Just a note to let you know, I'm on your side.  This too shall pass.

 

Terry

[kcjenkins]

Probably will blow over, as BHoffman wisely stated, but never hurts to talk to your E&O anyway, just to get their take on what, if anything, you should say and/or do, as to contacts with the former clients.  And as to your responsibility related to record retention.