Kirschner v. KPMG LLP
New York Court of Appeals
15 N.Y.3d 446, 938 N.E.2d 941 (2010)
- Written by Robert Cane, JD
Facts
Refco insiders had been committing fraud. The insiders had not been stealing from the company. Instead, they had been selling their holdings in the company for fraudulently inflated prices. KPMG (defendant) served as an outside auditor for Refco, but KPMG did not detect the fraud. Refco eventually went bankrupt. Kirschner (plaintiff) was appointed as the bankruptcy trustee. Kirschner sued KPMG under a theory of professional malpractice and negligence for failing to detect fraud committed by Refco. KPMG raised the defense of in pari delicto, arguing that the insiders’ misconduct must be imputed to the company because the misconduct was not totally averse to the interests of Refco. The district court entered judgment for KPMG. Kirschner appealed.
Rule of Law
Issue
Holding and Reasoning (Read, J.)
Dissent (Ciparick, J.)
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