A Florida CPA was sentenced in federal court in Boston for multiple counts of tax fraud and obstructing the Internal Revenue Code.
Greg Takesian, 54, of Miami, Fla., was sentenced last Thursday by U.S. District Court Judge William G. Young to two years in prison and one year of supervised release, and was ordered to pay restitution in the amount of $286,433 and a $10,000 fine. He was convicted in November 2017, following a five-day jury trial, of four counts of filing false tax returns and one count of attempting to obstruct and impede the IRS.
Takesian worked for Takesian & Company, a tax consulting firm owned by his father. Between 2008 and 2011, Takesian & Company received more than $2 million for tax and consulting services from At Home VNA, a home healthcare agency based in Waltham, Mass. In 2014, At Home VNA’s founder and owner, Michael Galatis, was convicted for fraudulently billing millions of dollars from Medicare.
Takesian spent more than $991,000 from Takesian & Company’s bank account on personal expenses, including cash and check payments to his wife and his girlfriend. In total, Takesian gave his wife more than $500,000 from the company bank account and his girlfriend over $200,000 of company funds. He also spent the money on Caribbean cruises, expensive clothing and nightclubs. Takesian didn’t report his personal spending from his firm’s bank account on his personal tax returns. After learning of the federal investigation, Takesian also filed false corporate and personal amended returns in an effort to cover up the nearly $1 million of unreported income.
Source: accounting today
Similarly, if your firm provides services to a criminal enterprise (e.g. pot grower – a federal crime) or your client has been indicted for criminal activity and you have been drawn into the investigation by the FBI, SEC or others, Will your policy respond?
How does your policy read?
Many accountants’ professional liability insurance policies contain a fraud and criminal acts clause. For example, CPAOnePro contains the following exclusion:
This policy does not apply to claim(s):
Based upon or arising out of, or relating directly or indirectly to:
Any insured committing any intentional, dishonest, criminal, malicious or fraudulent act or omission;
Go here for a specimen policy which the relevant sections highlighted.
The policy continues with following additional wording where the insurer affirms that it has no obligation to provide defense for criminal investigations, proceedings or prosecutions.
B. DEFENSE, SETTLEMENT & EXHAUSTION OF LIMITS (INCLUDED IN THE LIMIT OF LIABILITY)
We have the right to appoint counsel, and the exclusive right to defend any claim made under this policy, even if the allegations are groundless, false or fraudulent until there is a final adjudication against you. You may recommend counsel to us. We may accept that recommendation of counsel and such acceptance will not be unreasonably withheld, provided such counsel agrees to comply with our litigation management guidelines and agrees to accept our hourly fee payment. We are not obligated to defend any criminal investigation, criminal proceeding or prosecution against you. If a claim is not covered under this policy, we will have no duty to defend it.
The policy does add back some coverage in the conditions section:
15. INNOCENT INSUREDS
In the event that coverage under this policy would be excluded, suspended or lost because any of you concealed a claim from us, we will cover any other of you who did not participate in, acquiesce in or fail to promptly notify us of this concealment, provided that you complied with all other policy provisions.
In the event that coverage under this policy would be excluded, suspended or lost because of a dishonest, criminal, malicious, or fraudulent act, error, or omission by one or more of you under Exclusions 1.a., 1.b. or 1.h. we will cover any other of you who did not participate in, acquiesce in or fail to take appropriate action when you discovered the conduct, provided that you complied with all other policy provisions.
We have the right to recover against any insured responsible for dishonest, criminal, malicious or fraudulent acts errors, omissions, or discrimination, or concealment, or any other illegal act, whether or not intentional, for any claim expenses or damages paid under this section.
Which essentially means that the policy will defend those members of the firm that did not participate in a criminal activity or took appropriate action when the criminal conduct was discovered.
Best practices – innocent until proven guilty
No insurer intends to provide coverage for criminal acts as it considered to be against public policy; however, the most comprehensive accountants’ professional liability insurance policies follow the principle of innocent until proven guilty. Ideally your policy should include a component of defense coverage up and until any insured is found guilty by a trial, ruling or admission. Without this additional coverage, defense of a criminal complaint can be very expensive for your firm.
For example, the CPAGold™ (QBE) policy contains the following wording:
This Policy does not apply to any Claim made against you based upon, arising out of or resulting from:
7.1 any criminal, dishonest, fraudulent or malicious act or omission, deliberate misrepresentation, or any intentional or knowing violation of law; however, we will defend you under this Policy until it is determined by any trial verdict, court ruling, regulatory ruling or legal admission, whether appealed or not, that you did commit such a dishonest, fraudulent, criminal or malicious act or omission, or deliberate misrepresentation, or intentional or knowing violation of law. This exclusion does not apply to any of you who did not intentionally participate in committing such act or had no knowledge or reason to believe such an act, omission or violation of law was being committed, and who made proper disclosure after obtaining personal knowledge of such conduct;
Other insurers’ approach.
Similarly, the AICPA program (CNA) accountants’ professional liability policy contains the following exclusion:
This policy does not apply to:
D any claim based on or arising out of a dishonest, illegal, fraudulent, criminal or malicious act by any of you. We shall provide you with a defense of such claim unless or until the dishonest, illegal, fraudulent, criminal or malicious act has been determined by any trial verdict, court ruling, regulatory ruling or legal admission, whether appealed or not. Such defense will not waive any of our rights under this Policy. Criminal proceedings are not covered under this Policy regardless of the allegations made against you.
Further, GenStar, a leading insurer of accountants’ professional liability offers the following wording in the policy:
This insurance does not apply to Claims:
A. Arising out of a dishonest, fraudulent, criminal or malicious act or omission, or intentional misrepresentation, (including, but not limited to, actual or alleged violations of state or federal antitrust, price-fixing, restraint of trade or deceptive trade practice laws, rules or regulations) committed by, at the direction of, or with the knowledge of any Insured; however, for such Claims otherwise covered by this policy, the Company will provide a defense until such time as the act, error, or omission is found to be dishonest, fraudulent
NB. My underline.
Which means that that both insurers’ policies will provide a defense until proven guilty.
It is vital that you confirm your policy provides defense coverage for alleged criminal acts. If your policy does not contain the affirmative (defense coverage) wording as outlined above, send a letter to your insurer asking a coverage interpretation/confirmation. An example of a letter can be provided upon request.
Jorgensen & Company are not attorneys and do not offer any form of legal advice. Consult with appropriately qualified local counsel for more assistance. Rickard Jorgensen is President and Chief Underwriting Officer for the CPAGold™ program and may be contacted at (201) 345 2440 or firstname.lastname@example.org