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Rachlin Accountant Quits After Federal Judge Raises Conflict of Interest
Daily Business Review
April 20, 2009
A leader of Rachlin's advisory services division resigned from the Miami-based accounting firm after a federal judge questioned whether she placed her employer's financial interest ahead of her position as a court-appointed receiver for a health care company crippled by fraud.
As receiver for three years, Marta Alfonso collected $54 million for the government and victims of Bio-Med Plus, which operated an HIV blood transfusion scam that targeted Medicaid and Medicare.
Her resignation from Rachlin was disclosed late Thursday in a court filing responding to a litany of criticisms by U.S. District Judge B. Avant Edenfield over Rachlin's bills for tax services in the criminal forfeiture case in Savannah, Ga. Her letter of resignation giving 90 days' notice was dated Thursday.
Despite resigning from the firm, Alfonso, a forensic accountant, insisted she acted in the best interest of the receivership and asked the judge to be allowed to remain in the position.
"The receiver believes that she has discharged her duties faithfully and with honorable intent, if imperfectly, and that she respectfully requests to be permitted by the court to complete her duties as receiver," Tew Cardenas attorney Dennis Nowak wrote in the court filing on Alfonso's behalf.
Tew Cardenas name partner Thomas Tew said earlier this week that Alfonso was able to rehabilitate Bio-Med despite the fraud convictions of company officials and sell it to another medical company.
But Edenfield sharply criticized Alfonso in an April 7 order saying she had a clear conflict of interest for lobbying the monitor in the case to approve payments to Rachlin for two years of tax services. The judge said Alfonso submitted bills for $191,354 after the monitor set a budget of $76,500 and Alfonso allowed Rachlin to sit on tax returns for so long that Bio-Med accumulated $231,226 in interest and late fees.
Rachlin denied the accusation. "As far as I know all the filings were made on a timely basis," Lawrence Blum, the firm's managing partner, said Friday. He had no comment on Alfonso's resignation.
The monitor, Madison Associates of Woodbridge, Va., raised questions about the bills after a routine review last year.
Edenfield ordered Alfonso to respond to his accusations and to appear in front of him Tuesday, saying her responses to the tax matter were like trying to follow the "Who's on First" comedy routine of Abbott and Costello.
Nowak began his response to the show-cause order by saying, "What follows is not an attempt to make excuses." He then detailed numerous reasons why the tax issue blew up in the case. Among other things, he said the decision to move the company into a federal receivership resulted in unforeseen extra tax work. Rachlin filed extensions for 43 tax returns for the 2007 tax year.
"Rachlin has been working to reduce this liability ever since and continues to do so," Nowak wrote. "It was never suggested by the monitor or anyone else that the receiver's retention of Rachlin to perform professional accounting and tax services for the receivership created a conflict of interest."
Alfonso entered the case in an unusual way: as a defense witness who testified on tax issues at the 2006 criminal trial of Bio-Med executives in Savannah.
