Troy Accounting Firm Accused of Nationwide Scam
By SHAUN BYRON and ANN ZANIEWSKI
Of The Oakland Press
PUBLISHED: Monday, February 18, 2008
A Troy accounting firm is named in two recently filed lawsuits, alleging it is tied to a nationwide scam involving two Oakland County investment brokers blamed for bilking investors out of millions of dollars.
More than 80 people are suing Doeren Mayhew & Company Professional Corp. and company partners Todd Fox and James O'Rilley, alleging they were negligent and conspired to swindle investors.
The plaintiffs claim they lost more than $20 million in the elaborate Ponzi scheme that stretched across the country. The scheme was allegedly concocted by Edward May of the metro Detroit area and Frank Bluestein of Highland Township.
In another lawsuit filed this month in Oakland County Circuit Court, Doeren Mayhew & Company, Fox and O'Rilley are accused of accounting malpractice, breach of contract and intentional or negligent misrepresentation. That lawsuit, filed by Farmington Hills-based attorney Sheldon L. Miller, lists 14 plaintiffs.
May allegedly set up phony limited liability companies and encouraged people to invest in them as part of a Ponzi scheme. A Ponzi scheme is a type of investment fraud that pays abnormally high profits to investors. The money, however, comes from the investments of others rather than money generated by actual investment earnings.
The complaints say Doeren Mayhew & Company did accounting work related to the LLCs. Attorney Scott Silver, who is involved with the suit that lists more than 80 plaintiffs, said the company was also involved with bookkeeping and record-keeping.
Allegations against the defendants include that they solicited investors and created a corporation called SamJack Investments, Inc.
"The suit is entirely without merit," Doeren Mayhew chairman and CEO Mark Crawford said Thursday. "The firm, Doeren Mayhew, didn't do anything wrong, my partners that were named in it didn't do anything wrong.
"We had no idea that there was anything going on at the time. All we did for the entity was we prepared tax returns from information that Ed May gave us."
The lawsuit that lists 14 plaintiffs, filed by Miller, alleges between 500 and 1,200 investors may have been involved.
"We have also, at this stage, asked that the court consider turning it into a class action lawsuit," Miller said. "There are hundreds of people who were defrauded by May, and may have a claim against the accounting firm."
In November, the U.S. Securities and Exchange Commission filed charges against May and his company, E-M Management Co. LLC, in federal district court in Detroit.
The complaint says May and E-M Management sold interests in LLCs, and told people the LLCs had contracts to install and provide telecommunications services and equipment to well-known hotel chains and casinos. The LLCs were not really linked to any of the hotels, but May went as far as to create fake contracts indicating that they were, according to the U.S. Securities and Exchange Commission. The commission continues to investigate.
Harold Gurewitz, May's attorney, declined to comment on the allegations against May and said Thursday that he has not seen the lawsuits filed against Doeren Mayhew. May's estate has filed bankruptcy.
May's former business colleague, Bluestein, is also the subject of legal action. According to a lawsuit filed in January, Bluestein advised a Shelby Township couple to invest in projects that provided financing for telecommunications equipment at Hilton Hotels.
The suit said Bluestein encouraged Scott and Lorie Burnham to take out a second mortgage against their home to get the money needed. They shelled out tens of thousands of dollars and received some monthly payments on their investments, but checks issued on July 30, 2007, were returned because the E-M Management account had been closed.
Lawsuits also name GunnAllen Financial, which Bluestein had been affiliated with as an independent registered representative. At the time, he was operating as a broker through a company called Maximum Financial Group Inc., listed as having offices in Waterford Township. Bluestein tried to resign last September from GunnAllen Financial, but was terminated shortly thereafter, GunnAllen Financial officials have said.
GunnAllen Financial, Silver said, was negligent in allowing Bluestein to operate under their name. David Jarvis, executive vice president and the firm's general counsel, said he is not aware of any lawsuits that have been filed naming Silver as an attorney and has no opinion of Doeren Mayhew & Company Professional Corp.
Jarvis said Bluestein's record was clean when he was hired, except for one item that stretched back many years.
Bluestein was never the subject of customer complaints, arbitration or litigation during his association with the firm, Jarvis said.
Attorney David M. Foster is representing Bluestein in a number of cases involving his alleged role. Those cases, he said, are in private arbitration.
Foster said that Bluestein maintains he was also a victim in a sophisticated con that May had set up as the ringleader in a scheme that lasted for years.
"Mr. Bluestein was deceived and misled by Ed May, and the fact the SEC has not taken any action against Mr. Bluestein, but against Mr. May, is indicative of how the United States government looks at this case," Foster said.
May is also reportedly under investigation by the FBI, but a spokeswoman for the U.S. Attorney's Office in Detroit said it does not comment on whether a person is being investigated.
Contact staff writer Ann Zaniewski at (248) 745-4628 or email@example.com. Contact staff writer Shaun Byron at (248) 745-4685 or firstname.lastname@example.org.