A Georgia jury has returned a $10 million judgment against PricewaterhouseCoopers for “negligent misrepresentation” regarding the 1996 merger of nursing-home companies Convalescent Services and Mariner Health Group, according to published accounts.
The accounting firm was cleared on charges of civil fraud and racketeering. The jury also absolved PwC partner Glenn Williams and three former Mariner executives — chief executive officer Arthur Stratton, vice president David Stone, and former PwC partner Douglas Hansen, who became Mariner’s chief financial officer — of charges including racketeering, fraud, breach of fiduciary duty, and negligent misrepresentation.
The lawsuit was filed in 2002 Stiles A. Kellett Jr. and his brother Samuel B. Kellett, who ran Marietta, Georgia-based Convalescent Services, according to the Atlanta Journal-Constitution. In 1995, they agreed to sell their facilities to Boston-based Mariner. Though the deal included some cash, noted the newspaper, the Kelletts were compensated primarily in Mariner stock.
Mariner filed for Chapter 11 protection in 2000, and though it later emerged from bankruptcy, the Kelletts claimed that they lost more than $120 million on the deal. According to the Fulton County Daily Report, the plaintiffs asserted that they never would have agreed to the deal if PwC, two of its audit partners, and Mariner CEO Stratton had disclosed Mariner’s financial problems.
“We are very pleased with the verdict in connection with the fraud and RICO allegations,” said Sutherland Asbill & Brennan partner Elizabeth V. Tanis, who defended PwC and Williams, according to the Daily Report. Tanis said that she was “obviously disappointed” with the finding of negligent misrepresentation and added that the audit firm will consider an appeal.
Michael Bowers, who represented the Kelletts, reportedly told the paper, “It’s not what we expected or hoped for, but we won.”