The Ireland and Cayman Islands firm of Grant Thornton has accused a bankrupt US investment advisory firm of enabling a multi-million dollar fraud by failing to draw proper attention to serious concerns raised in its audit work. A lawsuit has been filed by the recipient.
Florida-based TCA Fund Management and the trustees of the credit funds it operates, including the TCA Global Credit Master Fund, said in legal papers filed this month in the U.S. District Court for the Southern District of Florida. , named John Glennon, audit partner at Grant Thornton Ireland.
However, Grant Thornton Ireland said in a statement on Tuesday evening that it “categorically denies all allegations of wrongdoing in the TCA Global Audit effort” and “will vigorously defend the allegations in this matter.” Ta. He declined to comment further.
Jonathan E. Perlman, a trustee of many TCA entities, said in his filing that Grant Thornton’s defendants, Grant Thornton Cayman Islands and Grant Thornton Ireland, have identified “material inconsistencies” in TCA Global. “They turned a blind eye” to “proper management.” A master fund that kept independent directors in the dark. Both accounting firms served as Master Fund’s auditors in 2017 and 2018.
The TCA Fund Management scandal was discovered in January 2020, with NBC News reporting that the company had been inflating the assets and profits of the TCA Global Credit Master Fund since 2017. The report names three employees who blew the whistle to the U.S. watchdog, the Securities and Exchange Commission. (SEC).
The TCA Master Fund project provided high-interest loans to small and medium-sized enterprises. The SEC found that many borrowers did not have enough cash to cover their own operating costs, used loan proceeds to pay off other debts, and ultimately defaulted on equipment from the master fund. discovered.
According to the SEC’s findings, which were later corroborated by the trustee’s investigation, the fund failed to record losses on defaulted loans and recorded investment banking fee income that it had not received and would not receive, resulting in a decline in net assets. The company’s value (NAV) has increased significantly.
“Misstatement of NAV misrepresents the financial health and potential solvency of an investment fund. Certain Insiders [TCA Fund Management] “The NAV was artificially inflated and allowed to continue through the conduct of the Grant Thornton defendants,” Perlman said in the filing, resulting in Master Funds overpaying fund managers. added.
He said the NAV was “significantly overvalued” as the value of the master fund’s assets was found to be about $400 million lower than the value reflected in the fund’s audited financial statements.
The Master Fund’s final audit report in 2017 concealed significant management issues from directors that would ultimately lead to receivership and SEC intervention, but “at the time of issuing the audit report, Grant Even though the Thornton defendants were aware of these issues, Perlman alleges that the report included an auditor’s review of the report rather than issuing a “qualified” opinion, which is far less serious. He said that he should have published the “adverse” opinions from the public.
In April 2019, the auditors indicated they planned to issue an adverse opinion on the 2018 financial statements, arguing that they did not fairly represent the fund’s financial condition, according to the filing. The receivers allege that Matthew Wrigley, an employee of TCA Fund Management, “used his influence” with Grant Thornton’s clients “as leverage to persuade them to change their minds.”
Shortly after, the auditors “presented a roadmap to obtain another qualified opinion in 2018,” which included “unseen and The trustees argued that this amounted to “pretending.” A qualified opinion will be attached to the financial statements.
The receivers are seeking judgment against the auditors and an award of damages in an amount to be determined at a jury trial. The case was first reported by the Irish Independent.