Gold v. Deloitte & Touche, LLP (In re NM Holdings Co., LLC)

Gold, the Chapter 7 bankruptcy trustee of 11 jointly administered bankruptcy cases, sought damages from Defendant Deloitte and Touche LLP (Deloitte). Gold alleged that Deloitte served as Venture's independent auditor from 1987 through at least May 2004. During this time, Larry Winget, Venture's sole shareholder, caused Venture to transfer tens of millions of dollars to various related entities without receiving anything in return. Winget received the benefit of these transactions because he wholly owned and/or controlled each of these related entities.

According to Gold's allegations, Deloitte audited Venture's financial statements from 1995 through 2001 in a negligent or reckless manner. Venture was required to submit various filings to the Securities and Exchange Commission because it had public debt, and these findings both failed to disclose material-related party transactions and falsely stated that other related party transactions were fair to Venture. Furthermore, Deloitte knew that some of Venture's related-party transactions "were not bona-fide business transactions and that Venture was not receiving anything of value from those parties in exchange for the multimillion dollar payments." Nevertheless, Deloitte represented that these transactions were "on terms no less favorable to the company than would be obtained if such transactions or arrangements were arms-length transactions with non-affiliated persons." If Deloitte had properly disclosed the unfair related party transactions, "independent third parties with the power to stop and prevent the continuance of such ongoing transactions would have done so, preventing Winget from siphoning Venture's assets." Deloitte knew that its independent auditor reports would be relied upon by Venture and third parties, and its failure to alert these parties to the improper transactions caused Venture damages in excess of $300 million.

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