In re Bennett Funding Group, Inc‪.‬

Argued: September 13, 2002 Richard C. Breeden is trustee of the Bennett Funding Group, Inc. (hereinafter ""BFG""), a defunct company that was used as the vehicle for a Ponzi scheme. Breeden sued, inter alia, the company's lawyers and an accounting firm on the theory that they should have detected the fraud. The trustee alleges that Arthur Anderson (hereinafter ""AA) was negligent in (1) issuing ""clean"" opinions for BFG's 1989 and 1990 audit years and (2) failing to notify appropriate authorities at BFG or law enforcement authorities when it (a) discovered problems with BFG's statements and its compliance with securities laws and regulations in 1992, (b) refused to issue a statement for 1991, and (c) withdrew its statement for 1990. The trustee's complaint against the law firms alleges that they submitted a letter to the Securities and Exchange Commission (""SEC"") which was false and designed to delay or hinder the SEC investigation of BFG. On August 21, 2001, the United States District Court for the Southern District of New York (Sprizzo, J.) granted summary judgment dismissing the complaint (Breeden v. Kirkpatrick & Lockhart LLP, 268 B.R. 704 (S.D.N.Y. 2001)) on the ground that the trustee lacked standing to sue third parties where the fraud was perpetrated by the debtor itself. See Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir. 1991). By then, the remaining defendants were Kirkpatrick & Lockhart LLP (""Kirkpatrick""), Robinson, St John & Wayne LLP (""Robinson"") and Storch & Brenner LLP (""Storch"") (collectively ""the law firm defendants"") and the accountants. The court had previously denied a motion to dismiss on standing grounds, but a year later entertained the motions presently under review on the papers as supplemented by a four-day evidentiary hearing at which the court heard witnesses and received in evidence a number of documents and deposition transcripts. Thus, the trustee was afforded the further opportunity to establish the existence of a genuine issue of material fact. On August 21, 2002, the court granted summary judgment. See Breeden, 268 B.R. at 714.