Landfill: State Sues Three Firms
Thursday, September 02, 2010
Lawsuits filed in Providence County Superior Court accuse two accounting firms of turning a blind eye to wrongdoing on the state landfill and claims they were otherwise complicit with those responsible. A third suit charges a money management firm of failing to disclose a conflict of interest and making unsuitable investments.
The lawsuits are the latest chapter in the scandal swirling around the state landfill, after a 2009 state audit found that widespread corruption and gross mismanagement by the Rhode Island Resource Recovery Corporation, which manages the landfill, wasted $75 million in taxpayer money.
The suits, which were filed by Resource Recovery on July 30, target two accounting firms. One of them, Lefkowitz, Garfinkel, Champi & DeRienzo, PC, worked for the agency from 1994 to 2006. The second firm, Restivo Monacelli, LLP, took over in 2006 and worked until 2008, when its contract was not renewed.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“Rather than identifying, analyzing, or reporting these numerous instances of wrongful conduct, Restivo failed to discharge its professional and contractual obligations, and was otherwise complicit with those responsible,” the suit states. The suit against Lefkowitz makes an identical claim.
Resource Recovery claims it is owed an unspecified amount of damages from both firms.
A third suit has been filed against the Van Liew Trust Company, which managed an employee pension fund and a trust fund for the costs of closing a superfund site. Resource Recovery accuses Van Liew of not disclosing the fact that one of its board members, John St. Sauveur, also was a commissioner for Resource Recovery.
Accounting Firms Charged With….Professional Malpractice, Civil Conspiracy
Restivo and Lefkowitz are both charged with nearly identical five counts: professional malpractice; breach of contract; civil conspiracy; aiding and abetting breaches of fiduciary duty by Resource Recovery commissioners, managers, and employees; and knowingly submitting false, erroneous, or incomplete documents or statements to public officials with the intent of misleading the state.
Resource Recovery said Restivo and Lefkowitz had a duty to notify state officials of any fraud, abuse, or illegal acts. The agency said Lefkowitz, in particular, represented “an active role and complicity in the decade of corruption and wrongdoing at RIRRC.”
The suits fault both firms for providing “substantial assistance and encouragement in … breaches of fiduciary duty” by advising and participating in business decisions of the Resource Recovery board of commissioners and failing to “promptly identify and appropriately address such issues.”
Firms Defend Their Records
Both firms defended their records in interviews with GoLocalProv, although they declined to discuss any of the specific allegations of the lawsuits. “We prepared our audit according to generally accepted auditing standards and the corporation signed off on our auditing report at the end of the audit and took responsibility for it,” said Edmund Restivo, a managing partner in Restivo. “We do very good work and stand by our record as to what we do.”
Richard DeRienzo made a similar defense of his firm and the principal of the firm who handled the account—Frank Champi. “We stand by the quality and scope of our auditing work. We do a lot of municipal accounts and Frank has significant experience in it,” said DeRienzo, who is a managing principal. “We’re very confident about what we did and how we did it.”
Investment Firm Accused of Breach of Contract and Fiduciary Duty
Resource Recovery claimed that Van Liew breached its contract and its fiduciary duty by not disclosing the conflict of interest and in making unsuitable investments. When the firm submitted a proposal to work for the corporation it had to certify that no officer of Resource Recovery had a financial interest in those proposals. But Resource Recovery said one of its commissioners, St. Sauveur, was also a director of the firm.
Resource Recovery also said that Van Liew “mismanaged” two of its funds. The agency said that the firm had made “unsuitable investment choices.”
In addition, Van Liew is charged with negligence and aiding and abetting St. Sauveur in breaching his fiduciary duty to Resource Recovery
By 2007, Van Liew managed more than $100 million in assets for Resource Recovery, which constituted about 32 percent of the total assets that Van Liew managed, according to the lawsuit.
Representatives of Van Liew could not be reached for comment. Thomas Holt, Jr., an attorney with the Boston-based K&L Gates and the lead counsel for Resource Recovery, also was unavailable for comment yesterday.
Editor’s Note: GoLocalProv is represented in accounting matters by Restivo Monacelli, LLP.
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