Lawsuit says NC accountant squandered money on Bahamas, limos, $10,000 strip club bill
Two former partners in a statewide accounting firm have sued its founder and his son, alleging the son spent $500,000 of the company’s money on plane tickets to the Bahamas, limousine rentals, alimony payments and $10,000 at a Raleigh strip club.
The lawsuit, filed Feb. 5 in Wake County, argues that Leon Little Rives II damaged the reputation of Rives and Associates, which has offices in Raleigh and Charlotte, chasing away clients, employees and partners. It says Rives used the R&A credit card for $200,000 in personal expenses and withdrew $300,000 in cash from bank accounts.
He frequently called clients while intoxicated and triggered an investigation by the state Board of CPA Examiners, and he caused an employee to complain of both sexual harassment and a derogatory comment about religion, the lawsuit says,
Rives father, William Leon Rives, was repeatedly told about his son’s behavior but failed to act, the suit says. Plaintiffs Jay Sharpe, former head of the Raleigh office, and Aaron Patel, once in charge of the Charlotte office, cite 13 claims including breach of contract, fraud and conspiracy. They seek damages higher than $25,000.
Terms of settlement
In a telephone conversation Tuesday, the younger Rives said terms of a settlement have been reached and documents will be signed soon. He said though Sharpe and Patel have sued R&A, they will end up owing the firm “a significant amount of money.”
“Unfortunately,” Rives said in an emailed statement, “a lawsuit has been filed against Rives & Associates by two former partners, each owning a little more than 1%, in an attempt to get out of partnership obligations to the Firm. ... While the lawsuit alleged improper accounting all monies are properly accounted for. While we remorse (sic) in the departure of Jay Sharpe and Aaron Patel, we wish them great luck in their new venture. Hopefully we can work together during this transition to ensure all client expectations are met.”
The suit details a long string of grievances against the younger Rives and repeated attempts to correct them through his father, who never responded.
In 2017, the suit says, Rives got drunk at a conference in Myrtle Beach and got into an argument that escalated into a fight witnessed by another R&A partner. In 2019, it adds, an R&A employee filed the sexual harassment complaint with Insperity, an employee resources company, which led to sexual harassment training for all the accounting firm’s staff.
Steel Tube ruling
The younger Rives had also served as director and secretary/treasurer of Steel Tube, donating an increasing slice of his time to that work, the lawsuit says. Rives billed only 204 and 305 hours with R&A in 2018 and 2019, having topped 700 in the years before, prompting clients to complain and threaten lawsuits.
In January 2019, a jury ruled Rives was liable for fraud and conversion of funds while at Steel Tube, requiring him to pay $1.9 million personally and $240,000 from R&A, the suit says. Neither Rives told the other R&A partners about the potential threat from the case, assuring them that it had been dismissed, and the jury award got media attention in and around Lexington, where R&A also has an office, it says.
The state CPA board later ruled the firm had violated conflict-of-interest regulations, issuing a $10,000 penalty, the lawsuit says. On Tuesday, the younger Rives said the board never issued such a penalty and the copy of the consent order included in the suit was only a draft. That order is not signed or dated and does not appear on the CPA board’s website.
Last month, both Patel and Sharpe told R&A they wanted to leave the firm because its reputation had been too severely damaged. They could not reach an agreement through mediation, and the elder Rives gave them a letter soon after telling them they would no longer be provided services.
They argue that multiple employees and partners have left R&A because of the Rives family, and that their professional lives have suffered through their employment there.
This story was originally published February 11, 2020 at 10:21 AM.