Miami Beach Community Health Center Files Suit Against Former Accounting Firms For Negligence and Fraud
~ Seeks compensation over firms’ failure to reveal $6.8 million theft by former CEO ~
MIAMI BEACH, FL – The Miami Beach Community Health Center (MBCHC) has filed suit against McGladrey LLP and CohnReznick LLP, its two former independent public accounting firms, for their failure to reveal a $6.8 million theft by the Center’s former longtime CEO. The former executive, Kathryn Abbate, was fired last year after her wrongdoing was uncovered.
The suit, filed in Miami-Dade Circuit Court (Case No. 12-47887 CA 23), alleges that the two auditing firms committed negligence, gross negligence and fraud in the performance of their professional duties.
“For many years, our former accountants not only failed the Center and the community it serves, but also failed the government agencies, foundations and other organizations that help fund its operations,” said Jane Gross, MBCHC Chairwoman. “We have no choice but to turn to the courts in an effort to recover these very important dollars that will allow the Center to do even more for the community.”
The accounting firms were responsible for conducting annual audits of the Center’s financial statements, preparing its federal income tax returns and performing other accounting services. These services were done by McGladrey between 2008 and 2010, and then by CohnReznick – then known as J.H. Cohn – from 2011 to 2012. Steven Schwartz, a New York-based CPA who oversaw most of the professional services performed by these firms, was also named as a defendant.
The suit alleges that Abbate’s thefts continued because the accountants kept what they knew to themselves rather than informing the Center’s Board – a serious disregard of the auditing firm’s most basic professional responsibilities and legal duties.
The lawsuit also notes that Abbate’s thievery came to an end in May 2012, when Schwartz told a senior member of Center management about a single check paid to Abbate in the amount of $5,000. The Center alleges that the accountants had seen such checks in prior years but had not informed the Center’s Board. According to the suit, after this revelation, a review of the Center’s financial records, conducted by a special investigative unit of CohnReznick, then uncovered the full extent of the theft, which included:
$3.2 million in unauthorized compensation; and
$3.6 million in more than 800 unauthorized checks.
CohnReznick was then fired as the Center’s independent public accountant.
Chairwoman Gross explained the Center’s decision to sue the accountants: “At a time when many not-for-profit organizations are struggling to keep providing valuable services to Florida’s most vulnerable, there was no greater breach of trust,” she said.
The suit was filed on behalf of the Center by Richard E. Brodsky of The Brodsky Law Firm, PL, based in Miami, Florida.
About Miami Beach Community Health Center
For more than 30 years Miami Beach Community Health Center has been dedicated to helping the uninsured and underinsured in South Florida obtain affordable, quality and professional medical care. The Center has been able to carry out this mission with assistance from both public and private funding sources. All patients receive the same quality health care and no one is turned away based on their economic situation.
At Miami Beach Community Health Center, physicians, nurse practitioners, physician assistants, dentists, registered pharmacists and support personnel staff primary health care facilities in two Miami Beach locations (South Beach & North Beach), and North Miami.