Virchow Krause, James Cape updates

Sept. 19, 2005 -- The lawsuit filed by James Cape & Sons Inc. alleging road building competitor corruption hurt its business is dismissed; Virchow Krause & Co., the firm's auditor, says it didn't do anything wrong, but raises questions about the integrity of James Cape.

The defendants in James Cape's suit were the firms and officers convicted earlier in federal court of rigging bids.

VK was sued by the Federal Insurance Co. this summer. Federal Insurance alleged James Cape was not a good risk for performance bond issuers, and that Federal would not have issued the bonds if VK had revealed James Cape's true financial condition.

VK, though, said any wrongdoing was done by Cape.

"Officers and owners of Cape intentionally misrepresented the true financial condition and circumstances of Cape to VK at the time of performance of these audits," Virchow Krause said in its response to the suit, adding: "If there were inaccuracies in Cape’s financial statements, it was the result of this dishonest and deceitful conduct, not the result of any failure of care on the part of VK."

Virchow Krause auditors sued over James Cape mess
Local firm missed $8.9m in unbilled receivables, suit says

July 25, 2005 -- The auditors for the defunct James Cape & Sons road building firm failed to disclosed the firm had $8.9 million in undisclosed receivables and was not a good risk for performance bond issuers, according to a federal court lawsuit.

The auditors, Virchow Krause & Co., of Milwaukee, also failed to meet generally accepted accounting principles when auditing Cape's financial statements, the Federal Insurance Co. alleged in the suit.

Federal issued bonds on Cape's behalf that guaranteed Federal would assume Cape's responsibilities if Cape could not meet them.

Cape went into receivership in April, and Federal "was required to perform Cape's obligations and pay Cape's subcontractors and suppliers on the bonded projects," the suit said.

Federal never would have issued the bonds had it known of Cape's true financial condition, according to the suit.

Virchow Krause made money performing accounting and auditing work for James Cape and "therefore stood to make a financial gain if Cape obtained the necessary bonds from Federal to continue performing construction of public works," the suit says.

Virchow Krause's response to the suit has not yet been filed.

Federal's suit specifically alleges that Virchow Krause violated accounting principles and standards by:

The suit seeks monetary damages.

To read Federal's suit against Virchow Krause, click here.

For attachment, click here.

James Cape earlier this year filed a lawsuit alleging corruption by Vinton Construction Co. of Manitowoc, Streu Construction Co. of Two Rivers, and two executives from each firm, hurt Cape's finances. The suit also names a former Cape employee who allegedly participated in the scheme.

The firms and officials were convicted of federal bid-rigging charges in the case.

Additional filings have been made in the James Cape suit. They include efforts by the firms and individual defendants John Streu, Ernest Streu, James Maples, Michael Maples and Daniel Beaudoin to have the case dismissed. James Cape opposes those motions.