Family's fund manager sues accountant
The money manager of New England's wealthy Ayer family has accused a prominent Boston accounting firm of malpractice and other violations for failing to catch a former family employee who allegedly looted more than $57 million from its trust funds.
The accountant, Vitale Caturano & Co. missed "multiple red flags" that should have tipped it off to the alleged fraud by a longtime employee of the money manager, according to a complaint filed in Suffolk Superior Court.
Those "red flags" include the employee allegedly diverting $12 million of family funds into questionable accounts, according to the lawsuit, and his attempts to allegedly distract the accountants by getting them to audit inconsequential matters.
The accounting firm denies wrongdoing and said it was hired late in the course of the alleged scams, in 2004. "We are sorry it has come to this, but know that we have the facts on our side, which will be clear as this goes through the legal process," said Richard Caturano, the firm's chief executive.
The lawsuit is being brought by Essex Street Associates, a Beverly money manager for the descendants of Frederick Ayer Sr., an industrialist who owned factories in Lowell in the late 1800s. In a separate action, Essex Street, which is owned by the Ayer descendants, said its former employee, chief operating officer James F. Doorly, led a "double life" and looted the family trusts of $57 million at least since 1996. The Ayer family said Doorly spent the money on mistresses, a Gulfstream jet, vacation homes, gambling, and lavish international trips.
An attorney for Doorly did not return messages yesterday. A person who answered the phone at his residence in Topsfield said he wasn't available to comment.
Essex Street, which is the business name of the family's Tenens Corp., now has hundreds of millions of dollars under management, a court filing states, and administers assets for over 100 Ayer family members. Its chief executive, Caleb Loring 3d, is himself a family member. The filing alleges Doorly abused the family's trust to siphon off millions to other entities he owned or controlled before the family discovered his actions and escorted him from its premises on March 21 .
The suit against Doorly, also in Suffolk Superior Court, was reported in yesterday's Boston Herald.
Doorly worked for Essex Street for more than 30 years. Vitale Caturano was hired on Jan. 8, 2004, replacing PricewaterhouseCoopers LLP in New York, where a spokesman said yesterday it hasn't been notified of any lawsuit.
In its suit against Vitale Caturano, Essex Street and family trustees claimed the accountant "was close to uncovering Doorly's misappropriation, but lacked the professional skepticism requisite of a professional accounting firm and adherence to audit procedure concepts." As a result the plaintiffs suffered more than $10 million in damages during the Vitale Caturano audit period alone, the suit said.
The filing states the accountant "should have uncovered" four types of schemes that Doorly used.
Doorly also allegedly created false entries in the Essex system to hide his spending, making the cash holdings of Ayer family members appear to match bank statements. Vitale Caturano was supposed to check to see if the holdings and bank statements matched, yet missed tens of millions of dollars in missing cash, the filing states.
Through this period Doorly tried to "shape or subvert" the audits he faced, the filing states, citing an e-mail from an assistant to Doorly that directed Vitale Caturano not to audit seven trusts -- including one that allegedly contained stolen funds. Vitale Caturano complied in violation of accounting rules that require broad sampling, Essex Street alleged.
The attempts to steer the auditors away from certain trusts continued into 2005, the suit claimed, eventually causing Vitale Caturano accountants to become suspicious.
Vitale Caturano attorney Nancy Reimer said the firm throughout this period complied with national auditing standards. Its audits of the Ayer accounts, she said, were limited by the terms of the agreements under which Essex hired the firm.
Ross Kerber can be reached at kerber@globe.com. 
