PROVIDENCE – The Rhode Island Supreme Court on Tuesday overturned a $5.7 million Providence County Superior Court judgement against Providence accounting firm Restivo Monacelli for alleged malpractice in its audits of the state’s Central Landfill in Johnston.
The Supreme Court ruled that expert testimony used in the prior judgement was not strong enough to establish a “causal link” that Restivo Monacelli’s alleged auditing failures resulted in certain damages claimed by the plaintiff, Rhode Island Resource Recovery Corp., a quasi-governmental corporation created to operate and manage the landfill.
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“Having established that expert testimony as to proximate cause was required in this case, we must ask ourselves, did Resource Recovery provide the required expert testimony as to the proximate cause?” the court’s decision stated.
“Our extensive review of the record reflects the fact that the experts presented by Resource Recovery definitely did not provide such testimony,” it stated.
Representatives for Resource Recovery did not immediately returns telephone calls for comment on Tuesday’s decision.
Edmund Restivo, managing partner for Restivo Monacelli, told Providence Business News his firm’s work for Resource Recovery complied with “generally accepted auditing practices.” He also credited his firm’s insurer for not accepting the previous court ruling.
“We thank our insurance company for standing by our side and our legal counsel for the excellent work they performed on our behalf,” he said. “For over 30 years, our firm has served as trusted advisers to our clients and we will continue to stand by our commitment of providing outstanding tax, accounting, and business advisory services.”
In February 2016, Providence County Superior Court ordered Restivo Monacelli to pay more than $5.7 million in damages following a jury trial, which ended in a verdict in Resource Recovery’s favor. Restivo Monacelli appealed the decision.
The case dates back more than 10 years, when Michael O’Connell was appointed as Resource Recovery’s executive director.
O’Connell uncovered numerous problems at Resource Recovery, the Supreme Court states, including “very large” charitable donations to organizations that had no relationship to Resource Recovery’s mission; overpaying for a real estate purchase; and monies in several of Resource Recovery’s trust funds that were not invested in accordance with the company’s policies.
After O’Connell reported the problems to the Gov. Donald L. Carcieri, a full audit was done and it confirmed many of the problems. It led to “necessary reforms” within Resource Recovery, the court states.
Resource Recovery claimed that Restivo Monacelli, in its auditing and accounting services for Resource Recovery from summer 2006 to summer 2008, “negligently failed to identify – or actively participated in concealing – the true status of financial statements.”
Resource Recovery claimed that Restivo Monacelli’s “actions or omissions postponed the detection of mismanagement, wrongdoing, and corruption occurring at (Resource Recovery) and delayed (Resource Recovery) and other authorities from addressing the issues and avoiding subsequent losses.”
In its appeal, Restivo Monacelli pointed out it was not the only allegedly negligent party: From fiscal 1995 to fiscal 2005, the firm Lefkowitz, Garfinkel, Champi & DeRienzo served as Resource Recovery’s auditor. And from 1996 to 2008, Van Liew Trust Co. was the trustee of two trusts at issue in the case.
The two firms, also once the target of lawsuits by Resource Recovery, have since settled their cases.
Restivo Monacelli has argued the two firms were both once alleged to have been negligent, and any negligence on their part “would potentially have had significant impact on the damages relative to the charitable contributions and the trust investments.”
Scott Blake is a PBN staff writer. He can be reached at blake@pbn.com.
