LOS ANGELES, July 1, 2015 /PRNewswire/ -- Danny Ly, the former Controller for the California Insurance Guarantee Association ("CIGA"), has filed a lawsuit against the Association alleging that it fired him after he blew the whistle about alleged financial irregularities, potential accounting fraud, and other potentially illegal conduct. The lawsuit was filed in the Los Angeles County Superior Court and assigned case number BC 586614.
CIGA serves as a safety-net for millions of California consumers who carry insurance – liability, auto, property and workers' compensation. Should their insurance company be found insolvent and forced into court-ordered liquidation, CIGA is supposed to be there to cover claims made to that insurance company. According to Mr. Ly's lawsuit, however, alleged poor management practices have led to higher costs, which are ultimately passed on to individual policyholders. Moreover, the alleged financial and accounting chicanery at CIGA may have led to the potential overcharging of certain insolvent insurers. Some of the accounting irregularities and improprieties alleged by Mr. Ly include:
- Improper revenue recognition, amounting to an overstatement of about $250,000,000 on CIGA's income statement;
- Improper write-offs of over 40,000 stale dated checks, totaling over $15,000,000, leading to an overstatement of net income and understating liabilities;
- CIGA's apparent failure to comply with California's Unclaimed Property Law;
- Suspicious opening and closing of numerous bank accounts for no apparent legitimate reason;
- Checks written and recorded within the general ledger that were never issued to the designated payees, increasing fraud risk;
- Improper recording of pre-liquidation recoveries, overstating net income and understating liabilities;
- Improper capitalization of expenses, leading to an overstatement of net income;
- Failure to record unearned premiums, understating liabilities.
In his lawsuit, Mr. Ly alleges that after he complained about the accounting irregularities and improprieties, CIGA began to retaliate against him and then swiftly fired him.
Mr. Ly is being represented by Mizrahi Law, APC and Helmer Friedman LLP.
Speaking about Mr. Ly's lawsuit, Ramit Mizrahi of Mizrahi Law, APC issued a plea for anyone with knowledge about Mr. Ly's allegations against CIGA to contact either her law firm by telephone or email – 323-454-1220 or email – or the law firm of Helmer Friedman LLP – 310-396-7714 or email.
Commenting about Mr. Ly's lawsuit, Andrew H. Friedman of Helmer Friedman LLP said, "It is truly unfortunate that following the Enron and Worldcom accounting scandals in 2001 and 2002 and the recent financial crisis in 2007 - 2008, many entities continue to resist compliance with the very accounting standards meant to protect companies and the general public."
Andrew H. Friedman
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SOURCE Helmer Friedman LLP