SANTA MONICA, Calif. – The former acting controller for the Comedy Store says in new court papers that a CPA partner in an accounting firm failed to provide him with crucial information and act within established deadlines so that the business devastated by the pandemic shutdown could have obtained at least $8.5 million in relief funds.
The ex-acting controller, Harold Breslow, gave a sworn declaration to Comedy Store attorneys that was filed Monday with Santa Monica Superior Court Judge Craig Karlan in opposition to a motion by Seattle-based Moss Adams LP to dismiss the case, which argued that it should have been brought in Washington state.
“The express terms of the engagement agreements compel dismissal of this lawsuit because (the Comedy Store) explicitly agreed in them that this and any disputes relating to Moss Adams’ engagement and services must be adjudicated in the state of Washington,” Moss Adams attorneys argue in their court papers. “For this reason, the action should be dismissed with prejudice and otherwise stayed.”
Attorneys for the Comedy Store state in their court papers that the club never had contact with Moss Adams representatives from Washington, nor did the firm have any Washington accountants or personnel involved in the matter.
The suit filed last Aug. 30 alleges that Moss Adams misrepresented its expertise and knowledge about the federal COVID-related relief program and failed to inform the Comedy Store that the application to apply for the government grants was closing in August 2021.
In his declaration, Breslow says he received assurances from Moss Adams CPA Aparna Venkateswaran that the firm could close the deal on the Comedy Store’s behalf and that his planned vacation in early August 2021 would not be a problem.
“I was not aware at the time, though I later discovered, that the (Small Business Administration’s Shuttered Venue Operators Grant) program was on the verge of termination,” Breslow says. “If I had known that fact, I would immediately have informed (Comedy Store CEO Peter Shore) and we would have taken steps to ensure that the store’s application was submitted in a timely manner.”
Breslow further says Venkateswaran “never informed me that the program was terminating and that the store’s eligibility for relief was therefore at risk.”
In his own declaration, Shore says the club was “uniquely susceptible to the consequences of the pandemic” and was closed from March 2020 until April 2021, when it reopened to limited capacity that was not lifted until the fall of that year.
Robust first-quarter profits in 2020 turned into $1.7 million in losses the next quarter, according to Shore, who added that the club produced fundraisers and did some live outdoor shows to try and offset some of the financial impact of the shutdown. But the debts and losses accumulated in 2020- 21 “were and remain crippling,” according to Shore.
Shore says he was encouraged that Moss Adams and Venkateswaran had helped other businesses with coronavirus relief applications and that the accounting firm and Venkateswaran had a reputation for being “all things SBA.”
Shore says he would have changed accounting firms had he known that Moss Adams allegedly lacked the basic knowledge of the grant program needed to provide the Comedy Store with the proper assistance.
“The grant funds that were forever lost due to the gross negligence and bungling of Moss Adams were central to the store’s recovery model,” Shore says.
A hearing on Moss Adams’ dismissal motion is scheduled Feb. 21.
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