The case is Cast Art Industries, LLP v. KPMG, LLP, Superior Court of New Jersey Law Division -- Middlesex County (Docket No. MID L-3295-03).

Cast Art sued KPMG in 2003 for professional malpractice and negligence for allegedly failing to detect a pervasive financial fraud at Papel Giftware, Inc. prior to Cast Art acquiring Papel in December 2000 for nearly $50 million. Judge Phillip Paley will preside over the trial with opening statements expected to
begin on Sept. 10.

During the trial, Case Art expects to introduce evidence that KPMG destroyed and misplaced critical documents in an effort to avoid facing liability for its conduct.

"In this case, as in too many others, KPMG has attempted to 'pull the wool' over the eyes of the Court and the jury," stated Michael Avenatti, a lawyer for Cast Art. "It is disappointing that KPMG continues to thumb its nose at the same judicial process countless other companies respect. After six years in litigation, we look forward to bringing KPMG's actions to light."

Cast Art claims that for three years prior to its acquisition of Papel, KPMG repeatedly affirmed that Papel's financial statements were accurate when in reality KPMG knew the company's management had engaged in a number of fraudulent schemes designed to inflate the value of the company to potential buyers. Cast Art alleges that Papel's management booked tens of thousands of fraudulent transactions on the company's books and records by, among other things, purposely shipping product to phony customers and double and triple shipping the same product to the same customer. A KPMG partner later acknowledged, in a memorandum he sent to others at KPMG, that Papel's management could not be trusted. Despite this, KPMG proceeded to falsely represent to Cast Art and others that Papel's financial statements were accurate and no fraud had occurred.

Cast Art plans to seek close to $50 million at trial. Cast Art is represented in the lawsuit by Michael Avenatti of the California law firm Eagan O'Malley & Avenatti, LLP and Alan Wasserman of the New Jersey law firm Wilentz, Goldman & Spitzer, P.A.