Ky judge awards $99 million to trust in fraud case
LOUISVILLE, Ky. (AP) — A large Chicago-based accounting firm has been hit with a $99 million judgment stemming from a fraud lawsuit brought by a family that owns dozens of hotels and more than a half-dozen casinos around the country.
Kenton Circuit Judge Patricia Summe earlier this month found that the firm Grant Thornton LLP was negligent in the way it handled taxes for William J. Yung and his family. Yung is the owner of the Crestview Hills-based hotel company Columbia Sussex.
Summe, in a Nov. 8 decision, ordered Grant Thornton to pay William and Martha Yung $4.7 million in compensatory damages and $55 million in punitive damages, as well as pre-judgment interest on $900,000 at a rate of 12 percent from June 11, 2007, to the day of the ruling.
Grant Thornton was also ordered to pay the 1994 William J. Yung Family Trust $14.6 million in compensatory damages and $25 million in punitive damages.
The Yungs argued that Grant Thornton, which handled the family’s finances from 1996 through 2007, was selling products knowing that they were not legal and would not survive scrutiny by the Internal Revenue Service.
Summe found that Grant Thornton intentionally misled the Yungs about various financial instruments and their taxes. The result was the Yungs settling tax liabilities with the IRS for $18.4 million in taxes, fines and fees.
“The infliction of economic injury is clear in this case not only as to taxes, interest and penalties, but as to the reputation of Yung individually as a businessperson and as a shareholder, especially when done intentionally through affirmative acts of misconduct,” Summe wrote in a 300-page decision. “Therefore these actions can warrant a substantial penalty.”
Summe’s decision is among the largest damages awards in recent years in Kentucky. Two jury verdicts since 1998 have exceeded Summe’s decision: a $270 million decision in Knott County in 2002 in a lawsuit concerning utility negligence and a $230 million decision in Rowan County over a shooting death.
The judgment is subject to appeal.
Attorney Kevin Murphy, who represented Yung and his family, said in a statement that, in the late 1990s, numerous accounting firms began selling “tax strategies,” which included a letter that gave the opinion of the legality of the tax strategy. Murphy called Grant Thornton’s actions “unconscionable.”
“Multiple families around the United States suffered greatly as a result of Grant Thornton’s actions. What they knew at the time they sold this ‘strategy’ and what they told their customers were two very different things,” Murphy said.
Michele Mazur, a spokeswoman for Grant Thornton, issued a brief statement saying the firm is disappointed in the ruling and will pursue an appeal.
Yung, through Columbia Sussex of Crestview Hills, Ky., operates 41 hotels under eight different brands, including Marriott, Crowne Plaza and Hilton hotels. Yung also has a stake in casinos in Louisiana, Mississippi, Nevada and the Caribbean island resort of Saint Maarten.
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