MILWAUKEE-A lawsuit involving more than a dozen Wisconsin CUs has gained an additional element with a new suit alleging accounting malpractice.
The complaint in the original suit alleges that Richard Jungen, the former CEO of Central States Mortgage Co., and other defendants were investors in a loan pool that was kept secret from plaintiff CUs, and that in June 2008 that pool was liquidated without informing the CUs, resulting in losses to those credit unions. The collapse of Central States Mortgage Co. is estimated to have cost somewhere between $50 and $75 million
The plaintiffs in that suit, which include about 15 credit unions, have now also filed suit against Wipfli, the accounting firm that represented Central States Mortgage Co. That suit is pending in Dane County. "It's an accounting malpractice claim for failing to disclose the insider relationships in their financial statements, failing to make adequate allowance for loan losses-for accounting malpractice, basically," explained Terrence Polich, a partner with Clifford & Raihala, S.C..
The plaintiffs have 45 days to answer the suit, after which the court will hold a scheduling hearing, which Polich said he expects to take place sometime during April.
"We think they have violated several pretty basic accounting principles, so we feel pretty good about our claims against them," he said.
The new case may be on a faster track than the original complaint. While the defendants had filed a motion for dismissal, Polich said that the court is holding that motion open and deciding whether to re-file the complaint because some defendants were not served during the original 90-day subpoena period.
