Fulton County agency sues accountant over bonuses
Auditor accused of failing to alert CIC board of directors
JOHNSTOWN The Fulton County Crossroads Incubator Corp. hopes to retrieve more than $3 million in questionable bonuses, not only from the two past executives who took the bonuses but from the accounting firm that was watching over the agency at the time.
In a lawsuit filed in state Supreme Court at Fulton County last month, the CIC demanded roughly $3.1 million in restitution from accounting firm Dorfman-Robbie and its owner, John Olsen.
The suit claims Dorfman-Robbie, which is now part of the Bonadio Group, spotted the unsanctioned bonuses and purposely withheld the information from CIC’s board of directors.
From 1999 to 2009 Jeff Bray and Peter Sciocchetti, vice presidents of the county Economic Development Corporation and the CIC, respectively, allegedly set up a series of large bonuses for themselves without gaining board approval.
They were both fired in 2010 and soon were facing litigation from the CIC. Until recently however, the accountants have largely dodged litigation.
“The judge originally dismissed our suit against the accountants on a technicality,” said Michael Reese, president of the Fulton County Center for Regional Growth, CIC’s parent entity. “We succeeded in re-filing in April.”
Dorfman-Robbie contracted with the CIC in 1999 to audit the books and perform other accounting services, and that arrangement continued for nearly a decade. Accountants at the firm noticed Bray and Sciocchetti’s bonuses in the spring of 2008 but neglected to contact the CIC board, the board says.
“Instead [Dorfman-Robbie] merely advised Bray and Sciocchetti … that they should inform CIC’s board of their own conduct,” according to the complaint. “Not surprisingly, neither officer followed [their] advice.”
A few months later, Sciocchetti allegedly hired the firm to do a separate tax project to determine how much information about his bonuses was required on IRS tax forms.
Eventually, the firm resigned to avoid further involvement in the matter, again neglecting to inform CIC’s board, the lawsuit says. A letter of resignation from the firm included in court paperwork stated, “All information in our possession is considered to be confidential information.”
The letter was addressed only to Sciocchetti.
The CIC claims Dorfman-Robbie was contractually accountable to the board, rather than its past executives, and the lack of communication renders the firm liable for the full bonus amount plus interest and lawyers’ fees.
“If they had told us about the bonuses as soon as they found out,” Reese said, “we could have stopped it, and talked to the public about what had happened and how we dealt with it.”
As it happened, the board didn’t find out about the bonuses until The Daily Gazette reported the situation in 2010. Reese himself found out about it in the newspaper.
The CIC is in the process of merging with the county EDC into the CRG, their parent entity.
“It wasn’t just the money,” Reese said, adding that the whole ordeal cost the CIC its reputation.