Audit Firm Wants Jury Verdict Set Aside

Argues that plaintiffs' allegations of negligent misrepresentation, regarding a merger and subsequent bankruptcy, were not proven at trial.
Stephen Taub and Dave CookApril 25, 2007

PricewaterhouseCoopers has petitioned a Georgia court to set aside a jury verdict regarding the 1996 merger of nursing-home companies Convalescent Services and Mariner Health Group, according to the Fulton County Daily Report.

“We believe the plaintiffs’ allegations of negligent misrepresentation were not proven at trial,” PwC attorney Elizabeth V. Tanis, of Sutherland Asbill & Brennan, told the publication.

In February, the accounting firm was cleared on charges of civil fraud and racketeering; a PwC partner and three former Mariner executives were also absolved of various charges. However, the jury found the firm guilty of negligent misrepresentation and ordered it to pay $10 million.

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The lawsuit had been 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 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.

PwC has now asked Cobb County Superior Court to set aside the verdict, reported the Fulton County paper. The firm reportedly argued that attorney and lead plaintiff William R. Bassett, who represents the Kellett family trusts, never appeared at the trial or presented other evidence necessary to prove his claims.

According to the Daily Report,Bassett described his decision not to testify as a “trial strategy matter” that should be addressed to the Kellett family’s trial lawyers. Christopher S. Anulewicz of Balch & Bingham, a co-counsel for the plaintiffs, told the publication he has not reviewed the PwC motion and won’t comment until the trust files a formal response. Even so, Anulewicz reportedly added, the plaintiffs never called Bassett as a witness because “the evidence was already in, and it would have been redundant. That’s the long and short of it.”