Court OK’s lawsuit against KPMG in Madoff fraud

A group of investors can sue the audit firm KPMG for its role in certifying the financial statements of two hedge funds that invested their money with Bernard Madoff, an appeals court has affirmed. In a decision last week, the Massachusetts Appeals Court ruled that 26 investors who lost a collective $20 million in the Madoff fraud may proceed in their lawsuit against KPMG. In their case, originally filed in 2010, the plaintiffs allege the giant firm did not adequately perform its audit and tax functions, failing to bring to light red flags that might have alerted them to the scheme. KPMG, based in New York, had argued that the investors should be subject to arbitration, a private proceeding, rather than suing in open court. But the appeals court agreed with a lower ruling that the investors were not bound by any arbitration agreements. More in The Boston Globe here.

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