NY Judge Denies KPMG Motion to Dismiss Fraud Suit Involving Ex-Texas Rangers Owner

A New York Supreme Court judge denied a motion by KPMG LLP to dismiss a suit that accuses the accounting firm of assisting former Texas Rangers owner and private equity investor Tom Hicks with defrauding lenders out of $525 million in debt, saying there were still questions of fact to determine.

Judge Saliann Scarpulla also denied KPMG’s motions to dismiss claims of aiding and abetting fraud and civil conspiracy.

“As I find that there exists questions of fact to preclude summary judgment on the fraud cause of action, I find that, for the same reasons, the motion for summary judgment dismissing the aiding and abetting fraud claim is denied,” Judge Scarpulla wrote. “As to civil conspiracy, while KPMG correctly states that a cause of action for civil conspiracy cannot survive by itself, as the fraud and aiding and abetting causes of actions survive, so does the derivative cause of action for civil conspiracy.”

In the case — GSP Finance LLC v. KPMG LLP — GSP alleges that KPMG shifted assets in an audit prepared for Hicks Sports Group LLC so the company would not exceed a $600 million debt cap on syndicated loans held by GSP and other lenders. GSP claims the fraudulent audit caused it to be unable to recover its debt, leading to a loss of $525 million.

GSP alleges that KPMG assisted Hicks Sports in delaying its default on the loans until March 2009, enabling Hicks to trigger a clause in the credit agreement that would prevent the lenders from converting the debt into equity stakes in two of Hicks’ sports teams, the Texas Rangers or the Dallas Stars, until 60 days following the close of the 2009 NHL season.

Prior to the end of the hockey season, the Texas Rangers filed bankruptcy, which GSP asserts denied them control over the sale of the team. The final bankruptcy sale failed to satisfy the full debt, according to GSP.

The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at 7(713) 426-2244 or info@cogdell-law.com.