SRHS v. KPMG Update: Going Nowhere Fast

Singing River Health Systems filed suit against their former auditors, KPMG, on January 16 of this year. Nearly six months later, the case has stalled. KPMG filed a motion to dismiss on March 6. Since then SRHS, through counsel Susman Godfrey, has filed four motions for time, extending the deadline for response until July 31.

Susman Godfrey, one of the heaviest of hitters in the corporate litigation world, surely has a reason. Considering they likely took this case (like most) on a contingency fee basis, there is little reason to slow litigation. Even in a contingency based case, the lawyers don’t run the show. It is possible that Singing River doesn’t want to proceed full bore until it can gain a footing in the lawsuits it is currently defending.  It is likely that a strong defense from KPMG could damage SRHS’ position in the retiree cases. SRHS could have also been waiting for the Jackson County Board of Supervisors to file suit, though given the climate between the two boards, this is unlikely.

It is not uncommon for attorneys to request time for personal matters. In the instant case, Tamar Lusztig, who is handling the matter for SRHS,  was recently wed and out of the country on her honeymoon. That would explain one or two extensions, but at four and counting, this case is being slow walked to first base.

4 thoughts on “SRHS v. KPMG Update: Going Nowhere Fast

  1. Thank you Mr/Mrs SRHS watch. Very interesting observation. I am guessing that KPMG’s attorneys can’t wait to get to trial. The management (SRHS) disclosures as to accounting practices, as well as KPMG’s testing of those practices will be fun reading.

    To add to the discussion, not much as been brought to light regarding FIDUCIARY issues. The two main legal treatises on this subject: Bogert On Trusts and Scott On Trusts; as well as the Restatements of Trust Law (2nd) and (3rd) are quite specific.

    The Trustees of the Retirement Plan and Trust are charged with at least these duties:
    1.) duty to exercise ordinary skill and prudence (the prudent man rule).
    2.) duty of loyalty to the interests of the beneficiaries.
    3.) duty of good faith and fair play between fiduciary and beneficiaries.
    4.) duty of impartiality with all beneficiaries.
    5.) duty to keep the beneficiaries informed and to account to them.
    6.) duty to keep accurate books and records.
    7.) duty to review trust investments periodically.
    8.) duty to uphold and defend trust.

    Well, hearing how these Retirement Plan trustees fulfilled these obligations is going to be enlightening. Not to mention, that these same individuals are also trustees, with the same obligation of duties; but this time, not to the retirement plan beneficiaries, but to the hospital itself. An explanation of this rather obvious conflict of loyalties should create new legal precedent.

    Mr/Mrs SRHS Watch, can you fill in some of the missing parts? Who are all of the trustees, since the early 1980’s? Who has served on the investment committee of the retirement trust and what are their qualifications? Who has served on the “so called” employee retirement committee? Have all the minutes of the retirement trust and associated committees become part of the legal proceedings?

    Finally, can you provide an updated synopsis of all legal cases? Have the individual cases of the Denham firm been consolidated into the class action of the Reeves firm? Can the Class Action result in criminal action? What is the status of the Class Action?

    And we haven’t even begun to discuss the Jackson County Board of Supervisors role. Thanking you (or your readers) in advance for further enlightenment.

    • Great points on the fiduciary duties. We are long overdue on foundational posts regarding the organization of the pension plan and trust and also overdue on a litigation update.
      The Denham cases are continuing in the Jackson County Chancery Court, but were stalled until this week awaiting action by special masters. They were not consolidated into the Federal action the Reeves firm is handling. Minutes for various boards are among those that have been produced by defendants. We will research as to specific committees. The depositions of Mike Crews, Morris Strickland, and John McKay have all been noticed to take place by the end of the month. The next court date (if memory serves) is scheduled for July 13, at 1 p.m.

      As to the role of the JCBOS, they are the only body, short of a court order, who intervene and solve this problem. The horse is out of the barn and they’re committed to finding every way to close the barn door.

  2. I just found out why the suit never progressed. Chris Anderson had signed an agreement with KPMG that prevented litigation. I guess that’s another detail he forgot to share with anyone.

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