Lawsuit Claims Telos and its Current Auditor, Goodman & Company, Knowingly Deprived Shareholders of Tens of Millions of Dollars
FAIRFAX, Va.– LAWFUEL – Legal News Network –The Fairfax County Circuit Court of Virginia ordered Telos Corporation and its former auditor, PriceWaterhouseCoopers LLP, to produce documents relating to Telos’s public redeemable securities in a $51 million dollar lawsuit against its certified public accountant, Goodman & Company, LLP.
In December 2005, Costa Brava Partnership, III, L.P. filed suit against Goodman in connection with its audit opinion of Telos’s 2004 annual report. The suit alleges that Goodman’s clean audit opinion is false and is the centerpiece of a carefully calculated campaign to deprive Costa Brava, and other holders of Telos’s public redeemable securities, of millions of dollars. Specifically, Goodman is alleged to have knowingly certified that Telos’s 2004 annual report complied with Generally Accepted Accounting Principles, even though that annual report contains what Costa Brava contends is a material misclassification of Telos’s obligation to redeem its public securities in December 2005 as a “long term obligation” (one that need not have been paid in 2005) rather than as a short term obligation. The lawsuit further alleges that Goodman’s audit opinion is false in respect to Telos’s significant understatement of the total value of its public obligation by more than $30 million. Costa Brava seeks compensatory, treble and punitive damages.
According to Fairfax County Circuit Court filings, Costa Brava served subpoenas on both Telos and PricewaterhouseCoopers LLP in the course of ongoing discovery. The subpoenas sought the production of documents relating to Telos’s public preferred securities. Telos, incorporated in Maryland but headquartered in Ashburn, Va., attempted to block the production of any such documents by invoking Maryland’s accountant-client privilege. The Court squarely rejected Telos’s argument, holding that there is no such privilege in Virginia. The Court ordered the production of responsive documents by mid-January 2007. Trial is scheduled for June 2007.
About Costa Brava Partnership III, L.P.
Costa Brava is a Boston-based investment fund with investment partners located in Virginia, throughout the U.S. and internationally.