News & Events

On November 3, 2010, the United States District Court for the Southern District of Illinois dismissed an action commenced by the bankruptcy trustee of five failed investment funds against, among others, STB clients H&R Block, Inc. ("Block") and RSM McGladrey, Inc. ("RSM").  The trustee's complaint alleged that McGladrey & Pullen LLP ("M&P"), negligently audited the funds' financial statements, thereby failing to uncover the Ponzi scheme perpetrated by Thomas Petters, which resulted in over $1 billion of losses for the funds.  The trustee sought to hold Block and RSM liable for M&P's supposed audit negligence based on a contractual arrangement between RSM, Block's indirect subsidiary, and M&P.  The court dismissed the complaint against all defendants on the grounds of in pari delicto, holding that because the manager of the funds had himself engaged in wrongdoing by joining the Ponzi scheme, the bankruptcy trustee was legally barred from recovery against M&P, and could not, therefore, succeed on the claims against Block or RSM.

The STB team consisted of Paul Curnin, Mike Garvey, Kim Hamm, Chantale Fiebig, and Minta Nester, with valuable assistance from paralegal Loretta Washienko.