CIC sues former accounting firm, seeks $3 million
JOHNSTOWN – The Crossroads Incubator Corp. recently sued the CIC’s former accounting firm, seeking more than $3 million – the same amount two fired economic development officials paid themselves in a 2010 scandal.
The CIC on April 19 filed a lawsuit in state Supreme Court in Johnstown against Dorfman-Robbie, its former accounting firm, and agent John Olsen. The firm is now known as the Bonadio Group. The CIC, whose parent company is the Fulton County Center for Regional Growth, is seeking $3.09 million from the firm.
That is the same amount the CIC is seeking through another separate lawsuit it previously filed against former economic development officials Jeff Bray of Schenectady and Peter A. Sciocchetti of Niskayuna.
In 2010, U.S. Internal Revenue Service 990 forms indicated Bray, then-EDC senior vice president, and Sciocchetti, then-executive vice president of the CIC, had been paid more than $3 million in bonuses. Payments were made without the approval of the agencies’ boards of directors. Both executives were later fired.
CRG President and Chief Executive Officer Michael Reese on Tuesday acknowledged the latest lawsuit against Dorfman-Robbie but has otherwise declined public comment on any litigation involving the scandal.
CIC attorney Daniel S. Cahill of Saratoga Springs couldn’t be reached this morning for comment.
The latest 24-page lawsuit against Dorfman-Robbie claims Bray and Sciocchetti as officers of the CIC “systematically between 1999-2009 looted the company funds through a surreptitious scheme” involving issuance of “performance bonuses” to themselves totaling $3.09 million.
The lawsuit claims Bray and Sciocchetti accomplished the scheme, in part, by each signing each other’s bonus checks and “willfully and fraudulently concealing their malfeasance” from the CIC’s board of directors.
But court papers accuse Dorfman-Robbie of being involved legally because, contractually, the firm should have notified the CIC.
By spring 2008, the lawsuit said, the accounting firm and agent Olsen “uncovered the large, improper and unapproved bonuses.”
While it was “not surprising” that Bray and Sciocchetti didn’t disclose their actions to the CIC board, the lawsuit said, the company’s accountants were in violation of a written agreement they had with the CIC. Instead of contractually informing the board of the executives’ actions, the lawsuit said Dorfman-Robbie and Olsen “merely advised” Bray and Sciocchetti to inform their CIC board about their activities.
Previously filed legal papers indicated Sciocchetti retained Dorfman-Robbie in June 2008 for a “special project” to gather documents to determine the “appropriate level of disclosure” for federal tax forms.
Court papers said the accountants realized the bonuses were not authorized by the CIC, but instead of informing the CIC board, the accountants urged Sciocchetti to do so this way:
“Schedule meeting with the full board of CIC to explain the current situation and the concerns we have discussed with you,” the accountants wrote to Sciocchetti in a letter. “Obtain an independent survey from a reputable and qualified organization that will support the level of 2007 executive compensation as being reasonable for a tax-exempt organization such as CIC.”
When Sciocchetti failed to comply, court papers said, Dorfman withdrew its representation of the CIC in a letter dated Sept. 10, 2008.
“The withdrawal letter was directed to Sciocchetti, with a copy to Bray, even though the Dorfman defendants knew or should have known, at this point, that Sciocchetti and Bray were not acting in the best interests of CIC, and therefore were unlikely to communicate [their] withdrawal to CIC and its board of directors,” court papers said.
“Indeed, Sciocchetti and Bray never informed CIC of the Dorfman defendants’ withdrawal,” court papers state.
Michael Anich covers Johnstown and Fulton County news. He can be reached at firstname.lastname@example.org.