Court tosses CIC suit vs. accountants

JOHNSTOWN – A lawsuit filed in April by the Crossroads Incubator Corp. against its former accounting firm has been dismissed in state Supreme Court.

The economic development agency had sued in an effort to recoup more than $3 million that two of its former executives paid themselves before they were fired.

Supreme Court Justice Richard T. Aulisi last month dismissed the lawsuit by the CIC against Dorfman-Robbie because the plaintiff took legal action too late. Citing a three-year statute of limitations, the judge noted the firm resigned as accountants, auditors and tax preparers for the CIC on Sept. 10, 2008. The lawsuit by the CIC didn’t commence until April 19 this year.

“Accordingly, the court finds that the plaintiff’s claims are time-barred,” Aulisi wrote in his Aug. 16 decision.

Dorfman-Robbie had moved to dismiss the complaint for expiration of the statute of limitations.

Fulton County Center for Regional Growth President and Chief Executive Officer Michael Reese said Friday said he’s not sure if the CRG – the parent company of the CIC – will appeal Auilisi’s decision.

“We’re discussing that now,” he said this week.

Reese said the CIC filed its complaint saying Dorfman-Robbie breached its contract, which would have had a six-year statute of limitations and would have fit the filing timeframe. He said the Dorfman-Robbie attorneys filed a motion to dismiss, saying the case should have involved a malpractice claim, which is a three-year statue of limitations.

“In my opinion, [Aulisi] made the wrong decision,” Reese said. “There was a breach of contract.”

In its original complaint, the CIC sought more than $3 million from Dorfman-Robbie – the same amount the two fired officials paid themselves in what became a scandal first reported in 2010.

The lawsuit named Dorfman-Robbie and agent John Olsen as defendants. The firm is now known as the Bonadio Group.

The CIC previously sought the same amount through a separate lawsuit 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-Fulton County Economic Development Corp. 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.

The suit against Dorfman-Robbie had claimed 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 claimed Bray and Sciocchetti accomplished the scheme, in part, by each signing the other’s bonus checks and “willfully and fraudulently concealing their malfeasance” from the CIC’s board of directors.

But court papers accused Dorfman-Robbie of being involved because, contractually, the firm should have notified the CIC of the payments.

By spring 2008, the lawsuit said, the accounting firm and agent Olsen “uncovered the large, improper and unapproved bonuses.”

The lawsuit said the company’s accountants violated a written agreement with the CIC, as Dorfman-Robbie and Olsen “merely advised” Bray and Sciocchetti to inform the CIC board about their activities rather than alerting the board directly.