Wausau-based Aqua Finance has accused Baker Tilly Virchow Krause of accounting malpractice for costing the company tens of millions of dollars in profits and is demanding $327 million in damages.
A Marathon County jury will begin deliberations today after hearing more than four weeks of testimony in a trial for a civil lawsuit filed by Aqua Finance. The company accused its former accounting and advising firm of negligence and breach of contract.
Aqua Finance's attorneys argued that Baker Tilly and the partner who managed Aqua Finance's account, Kevin Prather, withheld for one year that Aqua Finance's loan loss calculations were improperly calculated and did not meet industry standards, according to court records.
Baker Tilly's attorneys say the company's losses were because of the economy, not accounting errors.
Aqua Finance downsized from 380 employees in January 2008 to 97 employees in February 2011 as it dealt with financial woes, according to court records.
Ralph Weber, an attorney representing Aqua Finance, asked jurors Tuesday during closing arguments to award up to $167 million in compensatory damages and another $160 million in punitive damages. Aqua Finance won't recover its loses until sometime between 2020 and 2025, he said.
"These dealers were hurt and it's going to take a while to repair that," Weber said of Aqua Finance's customers.
Aqua Finance was founded in 1986 and provides financing to water treatment dealers across the country.
According to a complaint filed in court:
Prather announced in February 2008 that Aqua Finance's loan loss reserves were not conducted in accord with industry standards since Jan. 1, 2005, and the company's loan loss reserves must be increased by $20 million. He later said that he discovered the problem one year earlier, but had not reported it to Aqua Finance.
Baker Tilly withdrew from its agreement to complete Aqua Finance's 2007 audit until after the company resolved its loan reserve issue. Aqua Finance's struggles to obtain credit without the completed audit led to the loss of possible contracts with vendors and ultimately forced the company to lay off employees.
Thomas Falkenberg, an attorney for Baker Tilly, told jurors that Aqua Finance made poor business decisions in not maintaining adequate reserves in a declining economy. Falkenberg said business in the water treatment industry was down 30 percent at the time and Aqua Finance was suffering as a result.
"The accounting didn't create those losses," Falkenberg said.
Jurors likely will take days to reach a consensus on the complex verdict that includes more than a dozen allegations against Baker Tilly.
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