EXHIBIT 1

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IN THE CIRCUIT COURT OF THE 11th

JUDICIAL CIRCUIT IN AND FOR 

MIAMI-DADE COUNTY, FLORIDA

CIVIL DIVISION

CASE NO:

COÖPERATIEVE RABOBANK U.A., 

NEW YORK BRANCH, BROWN 

BROTHERS HARRIMAN & CO., BANK 

HAPOALIM B.M, MITSUBISHI 

INTERNATIONAL CORPORATION, 

ICBC STANDARD BANK PLC, 

TECHEMET METAL TRADING, LLC, 

MERCED PARTNERS LIMITED 

PARTNERSHIP, ATHILON CAPITAL 

CORP., LLC, and HAIN CAPITAL 

INVESTORS MASTER FUND, LTD.,

Plaintiffs,

v.

EISNERAMPER LLP,

Defendant.

COMPLAINT

Plaintiffs Coöperatieve Rabobank U.A., New York Branch (“Rabobank”), Brown Brothers

Harriman & Co. (“BBH”), Bank Hapoalim B.M. (“Hapoalim”), Mitsubishi International

Corporation (“Mitsubishi”), ICBC Standard Bank Plc (“ICBCS”), Techemet Metal Trading, LLC

(“Techemet”), Merced Partners Limited Partnership (“Merced”) and Athilon Capital Corp., LLC

(“Athilon”), as successors to Woodforest National Bank (“Woodforest”), and Hain Capital 

Investors Master Fund, Ltd. (“Hain Capital”), as successor to Bank Leumi USA (“Leumi”), by and 

through their undersigned attorneys, for their Complaint against Defendant EisnerAmper LLP

(“Eisner”), allege as follows:

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NATURE OF THE CASE

1. Plaintiffs (or their predecessors in interest) provided secured credit facilities and 

associated loans and precious metal leases to Republic Metals Corporation (“Republic”)

1

, a 

precious metals refiner based in Opa Locka, Florida. They bring this lawsuit against Republic’s 

former auditor, Eisner, to recover damages caused by the inaccurate clean audit report recklessly 

issued by Eisner for Republic’s 2016 financial statements. Eisner issued its audit opinion knowing 

that it would be used and relied upon by Republic’s creditors, including Plaintiffs. The audited 

financial statements represented that Republic had precious metals inventory valued at $134.8

million. In fact, the number was a fiction and the true value of Republic’s actual inventory was a 

fraction of that amount.

2. In conducting its audit, Eisner knew that Republic’s inventory valuation was based 

on nearly 2,000 drums of hydroxide—a refinery byproduct—that purportedly contained millions 

of dollars of extractable silver and gold. This inventory was the most significant asset on 

Republic’s balance sheet, representing over 50% of the current assets reported on its 2016 balance 

sheet. For an auditor, high-value inventory items always require careful scrutiny, but this is 

especially so when each unit of inventory—here, a drum of a hydroxide mixture—differs in value, 

weight, and composition from unit to unit. But Eisner, evidently lacking the requisite industry 

knowledge and in derogation of Generally Accepted Audit Standards (“GAAS”), blindly accepted 

Republic’s counts and valuation methodologies at face value, without conducting any independent 

testing, verification, or other assurance procedures, and without even understanding what Republic 

was doing. Moreover, in failing to audit inventory, Eisner ignored red flags showing that 

Republic’s inventory values were wildly overstated—including the very fact that Republic was 

 

1 Now known as Miami Metals II, Inc.

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sitting on so many unprocessed drums of byproduct of substantial value (over $100 million in 

precious metals), which it had yet to monetize.

3. In extending credit to Republic, Plaintiffs relied on Eisner’s professional audit 

opinion, including that Republic’s 2016 financial statements fairly presented, in all material 

respects, Republic’s financial position and results of operations and that they were prepared in 

accordance with Generally Accepted Accounting Principles (“GAAP”). Neither was true. Had 

Eisner exercised due professional care and the requisite degree of professional skepticism, the 

misstatements and errors in Republic’s financial statements would have been easily detected. But 

Eisner did not conduct an audit in accordance with GAAS. Indeed, its “audit” of inventory 

amounted to no audit at all and its procedures were no more thorough than checking arithmetic

based on inputs provided by Republic’s management. When an auditor ignores obvious risks and 

utterly abandons the guidelines and principles that govern the profession, its culpability moves 

beyond mere negligence to extreme recklessness, and that is how Eisner’s performance must be 

viewed here.

4. In November 2018, Republic filed for Chapter 11 bankruptcy as a result of what 

Republic described as “a significant discrepancy in its inventory accounting.” As of that date, 

Republic owed the Plaintiffs over $177 million under loans and metal leases, which it could not 

repay. Of this amount, approximately $135 million remains unpaid as of today and, of that amount, 

no less than $61.5 million is likely to remain outstanding after expected distributions from 

Republic’s bankruptcy estate are made.

5. This complaint brings claims for negligent misrepresentation, gross negligence, and 

common law fraud.

PARTIES

6. The Plaintiffs are a group of financial institutions and precious metals lessors that 

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(directly or through their predecessors in interest) extended nearly $200 million in credit to 

Republic pursuant to certain secured credit and lease agreements. 

7. Plaintiff Rabobank is a foreign branch office of a financial institution incorporated 

and existing under the laws of the Netherlands with its principal place of business located as 245 

Park Avenue, New York, New York 10167.

8. Plaintiff BBH is a New York limited partnership with its principal place of business 

located at 140 Broadway, New York, New York 10005. 

9. Plaintiff Hapoalim is a foreign branch office of a financial institution incorporated 

and existing under the laws of Israel with its principal place of business in the United States located 

at 1120 Avenue of the Americas, New York, New York 10036.

10. Plaintiff Mitsubishi is a New York corporation with its principal place of business 

located at 655 Third Avenue, New York, New York 10017. 

11. Plaintiff ICBCS is a corporation incorporated and existing under the laws of 

England and Wales with its principal place of business located at 20 Gresham Street, London, 

EC2V 7JE, United Kingdom. 

12. Plaintiff Techemet is a Texas corporation with its principal place of business 

located at 6025 Genoa Red Bluff Road, Pasadena, Texas 77507.

13. Plaintiffs Merced and Athilon purchased Woodforest’s rights, claims and privileges

associated with Republic’s obligations to Woodforest. Plaintiff Merced is a Delaware limited 

partnership, and Plaintiff Athilon is a Delaware limited liability company, both maintaining a 

principal place of business located at 601 Carlson Parkway, Ste. 200, Minnetonka, Minnesota

55305. (Woodforest, is a national banking association with its principal place of business located 

at 1330 Lake Robbins, Suite 100, The Woodlands, Texas 77380.)

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14. Plaintiff Hain Capital purchased Leumi’s rights, claims, and privileges arising in 

connection with Republic’s obligations to Leumi. Hain Capital is organized under the laws of the 

Cayman Islands, with its principal place of business located at 301 Route 17, 7th Floor, Rutherford, 

New Jersey 07070. (Leumi is a New York chartered bank with its principal place of business 

located at 579 Fifth Avenue, New York, New York 10017.)

15. Defendant Eisner, is a national public accounting firm with offices around the 

country, including offices in Fort Lauderdale, West Palm Beach, and at 1001 Brickell Bay Drive, 

Miami, Florida 33131. It is registered as a limited liability partnership in the State of Florida with 

the Florida Secretary of State, Division of Corporations, and is licensed as a CPA Firm with the 

Florida Department of Business and Professional Regulation (License Number AD64074).

JURISDICTION AND VENUE

16. This Court has general subject matter jurisdiction because this is a civil dispute 

involving more than $25,000. It has personal jurisdiction over Defendant Eisner under Florida’s

long-arm statute, Fla. Stat. § 48.193, in that Plaintiffs’ causes of action arise out of Eisner’s 

engaging in business in the state and from tortious acts and omissions committed within the state. 

Venue is proper in this Circuit under Fla. Stat. § 47.011, because Eisner resides in Miami-Dade 

County. 

FACTUAL BACKGROUND

Republic Metals Corporation

17. Republic, incorporated in the State of Florida in 1980, was in the business of 

refining, selling, and brokering precious metals. The company was family-owned and was 

operated by Chief Executive Officer Jason Rubin. Its Chief Financial Officer was David Comite. 

Republic acquired minimally processed gold and silver and processed it into finished metal at its 

refinery located in Opa Locka, Florida. Both Rubin and Comite worked out of Republic’s offices 

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at the refinery site.

18. In its early days, Republic primarily refined gold, but in 2013 it shifted its focus to 

silver. The process for refining gold and silver is not the same. Gold refining involves melting, 

whereas silver refining is mainly a chemical process. Moreover, the silver refining process takes 

longer, and the process involves a much larger volume of raw materials. A byproduct from the 

silver refining process is a hydroxide sludge, which contains the remnants from the refining 

process, mainly water, copper, and various quantities of precious metals that were not extracted 

through the main refining process. 

19. As Republic ramped up its silver refining operations, it generated substantial 

quantities of the hydroxide byproduct, which it stored in drums (numbering nearly 2,000 in 2016). 

These drums of hydroxide sludge were reported in aggregate on Republic’s balance sheet as 

inventory and represented the single largest asset for each year.

20. Republic obtained working capital for its operations through precious metal leases 

and loans provided under the Intercreditor credit facilities further described below. These credit 

facilities were secured by Republic’s purported precious metals inventory.

Eisner’s Negligent Audit of Republic’s Precious Metals Inventory

21. Republic’s 2014 and 2015 financial statements were audited by Crowe Horwath 

LLP (“Crowe”). Crowe performed its audit functions negligently and failed to discover that 

Republic’s inventory value was wildly overstated.2

22. In October 2016, Republic fired Crowe and engaged Eisner to audit its 2016 

financial statements. Eisner’s engagement agreement, dated December 2, 2016, was signed by 

 

2 Plaintiffs sued Crowe in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida. 

Crowe removed the case to the United States District Court for the Southern District of Florida and sought to 

transfer the case to the Southern District of New York; Plaintiffs moved to remand. The transfer motion was granted 

and the abstention/remand motion is sub judice in the federal court in New York.

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Eisner partner Travis Epp and addressed to Republic’s CFO Comite at Republic’s offices in 

Florida, where Comite signed the engagement agreement.

23. In mid-April 2017, Eisner’s audit personnel visited Republic’s Florida offices for 

an on-site inspection and to begin the 2016 year-end audit. In connection with that visit, Republic 

provided Eisner with a trial balance showing an inventory value of $134,455,218.96.

24. Before Eisner’s visit, Republic had supplied Eisner with a “narrative,” which 

purported to explain its inventory processes. Republic claimed to maintain a “perpetual inventory 

system,” which it tracked through its software system and verified with physical counts. The 

narrative also identified four categories of inventory, of which three contained precious metals:

“The vault” (finished goods), “Bars inventory” (metals yet to be refined), and “Sweeps” 

(byproducts stored in “large drums” that contain “low grade materials”). The other inventory 

category (not relevant here) was “Diamonds.” 

25. In designing and conducting its audit procedures, Eisner should have made 

inventory a major focus. It is well known that fictitious inventory has been at the center of 

numerous significant cases of fraudulent and misstated financial reporting. As a general matter, 

under GAAS, observation and verification of inventory counts are mandatory components of an 

audit, and the valuation of inventory is always a key part of an audit because of its materiality and 

the high risk of errors or misstatements. At Republic, further scrutiny was required because its 

reported inventory value represented such a large proportion of the overall value of the current 

assets on the balance sheet. From an audit perspective, inventory at Republic presented a 

significant risk of material misstatement and, thus, required an appropriate audit response.

26. On April 18, 2017, Republic provided Eisner with accounting work papers, 

including a chart entitled “December 2016 INVENTORY.” The chart purported to breakout 

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inventory by type (e.g., Gold, Silver, Platinum, Palladium, etc.) and to classify it according to its 

category (e.g., Vault, Bars, Sweeps, and Refinery). The largest component of inventory by weight 

and value was silver in the refinery (7,753,042.96 troy ounces valued at $125,909,417.67 (as of 

12/31/16)), a category that was not described in Republic’s inventory narrative. 

27. On April 19, 2017, Republic supplied Eisner with separate spreadsheets, 

corresponding to each of the precious metal inventory categories described in the inventory 

narrative. These spreadsheets were named: “December Bars Inventory.xlsx,” “December Sweeps 

inventory.xlsx,” and “December Vault Inventory.xlsx,” and they reported the precious metal 

contents held by Republic for each category. However, the combined weights of the precious 

metals shown on the three charts were a fraction of the total quantities necessary to support the 

$134,455,218.96 inventory value reported on Republic’s trial balance. 

28. To close the substantial gap between the value of the precious metals calculable 

from Republic’s “bars,” “sweeps,” and “vault” inventory charts and the $134 million value on the 

trial balance, on April 25, 2017, Republic’s CFO, Comite, provided Eisner with another chart 

entitled “au-ag refinery calculation.” According to the “au-ag refinery calculation,” Republic 

estimated that its “refinery” inventory contained an additional 29,550 troy ounces of gold (worth 

$34 million at year end 2016 prices) and 6,304,000 ounces of silver (worth $102,376,960 at year 

end 2016 prices), which were stored in 1,973 drums of hydroxide sludge. The quantities shown on

the “au-ag refinery calculation” were not based on actual inventory counts but were estimates 

derived from historical data. In fact, the calculations were bogus, and the quantities did not exist.

29. Incredibly, despite the materiality of the inventory values at issue, the significant 

risk of misstatement, the numerous testing requirements under GAAS for inventory specifically 

and significant balance sheet items generally, and the auditor’s general duty of skepticism, Eisner 

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performed no audit procedures to test or verify Comite’s “au-ag refinery calculation.” Instead, it 

relied entirely on the say-so of the CFO of the company that it was auditing.

30. Eisner did not even physically inspect or count the drums. Comite obtained (and 

forwarded to Eisner) an email from an employee in Republic’s wastewater processing facility, who 

reported on February 17, 2017 that “We have a total of 1,973 drums of high grade hydroxides left.”

Eisner accepted that figure as accurate without verifying it.

31. Despite being required to do so under GAAS,

(a) Eisner did not observe, conduct or verify a physical inventory count of the 

drums of hydroxide;

(b) Eisner did not observe or weigh the hydroxide drums or a random sample

to verify that the weights in inventory matched the weights from the historical lots shown on the 

“au-ag refinery calculation”;

(c) Eisner did not test the contents of the hydroxide drums or a random sample 

of the drums to verify their supposed precious metal contents;

(d) Eisner did not ascertain the cost or feasibility of extracting the gold and 

silver from the hydroxide;

(e) Eisner did not ascertain or verify that the hydroxide sludge could or would 

be refined and sold within one year or that it was to be sold or consumed within the normal 

operating cycle, which are the characteristics of a “current” asset;

(f) Eisner did not investigate or validate Republic’s method for valuing the 

inventory of hydroxide sludge based on prior data shown on the “au-ag refinery calculation”;

(g) Eisner did not obtain a sufficient understanding of the derivation and 

meaning of the historical data on the “au-ag refinery calculation:” and

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(h) Eisner did not inquire why the drums of “high grade hydroxides,” which 

were now the largest component of Republic’s inventory, were not even listed in Republic’s 

inventory “narrative.” The only “drums” identified in the narrative were those included in 

“sweeps” and were described as containing “low grade materials.” 

32. Had Eisner performed even one of the above-listed procedures, it would have 

immediately recognized that Comite’s inventory valuation methodology was flawed and 

unreliable: 

(a) First, had Eisner required an independent valuation of the hydroxide barrels 

or a statistically appropriate sample, it would have ascertained that they had little or no value. This 

type of testing is easily done and is a standard procedure for an auditor.

(b) Second, had Eisner investigated Republic’s valuation methodology, it 

would have easily determined its invalidity. Republic’s methodology valued current inventory by 

extrapolating from purported historical data. But it was an apples-to-oranges comparison. The 

majority of the current inventory of hydroxide sludge was created at the end of the refining process 

(in the wastewater process), after virtually all the valuable materials had been refined out. By 

comparison, the historical data on the “au-ag refinery calculation” was based on precious metal 

recoveries obtained from byproducts during the main refining process when larger amounts of 

valuable materials were present. Also, the current inventory was valued on a per-drum basis. By 

comparison, the historical data in the “au-ag refinery calculation” included lots that aggregated 

multiple drums (all of variable weights) collected over weeks or months of refining.

(c) Third, had Eisner questioned Comite about the historical data set on the “auag refinery calculation,” it would have instantly recognized that it was not a reliable basis for 

estimating current inventory values. The descriptions of the lots in this historical data refer to “preCase 1:20-cv-22009-MGC Document 1-2 Entered on FLSD Docket 05/13/2020 Page 11 of 24
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precip” or “pre-precipitation.” Eisner should have inquired whether the current inventory of 

hydroxides was “pre-” (when silver content is extremely high) or “post-” (when it is extremely 

low) precipitation—it was the latter. The descriptions in the data also contain date ranges for each 

clean up bar (which was the nomenclature and numbering system used on the chart to describe 

each lot). The ranges differed: some were collected in one month; others were collected over 

several months. As a result, the weights varied dramatically (a low of 40 pounds to a high of 1,500 

pounds). The variability should have alerted Eisner to the plain fact that the “clean up” bars shown 

on the chart did not equate to a single 55-gallon drum and that it was unreasonable to assume, 

without any testing or independent validation, that the 1,973 drums in current inventory had the 

same average weight as the 160 line-item clean-up bars on the “au-ag refinery calculation” chart.

(d) Fourth, had Eisner conducted a physical inspection of the drums, their 

storage, and Republic’s record keeping, which could have been done easily and is required under 

GAAS, it would have observed that Republic’s inventory controls, storage methods, and tracking 

methodologies were insufficient and unreliable.

(e) Finally, an auditor reasonably knowledgeable in the industry, as Eisner was 

required to be, would have known that it was implausible that a refinery would hold nearly two 

thousand drums of hydroxide sludge, generated as byproducts of the refining process, with the 

average drum containing precious metals worth more than $69,000. Indeed, it is known in the 

industry (and disclosed in the Republic’s own inventory narrative) that a refiner often pays others 

to dispose of these materials as they contain insufficient value to justify the cost of storage and 

extraction.

33. On May 30, 2017, Eisner issued a clean audit opinion for Republic’s financial 

statements for the fiscal year ending December 31, 2016.

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34. In its audit opinion, Eisner stated that it had conducted its audit of Republic “in 

accordance with auditing standards generally accepted in the United States of America”, which it 

summarized as requiring it to “plan and perform the audit to obtain reasonable assurance about 

whether the financial statements are free from material misstatement.” Eisner assured that in 

issuing its opinion it had obtained “audit evidence” that was “sufficient and appropriate to provide 

a basis” for its “audit opinion.” 

35. With its assurance of having followed GAAS and of having obtained sufficient 

audit evidence to support its audit opinion, Eisner concluded: “In our opinion, the combined 

financial statements referred to above present fairly, in all material respects, the financial position 

of Republic Metals Corporation and Affiliates as of December 31, 2016, and the combined results 

of their operations and their cash flows for the year then ended in accordance with accounting 

principles generally accepted in the United States of America.” 

36. In issuing a clean audit opinion for Republic’s financial statements for 2016, Eisner 

breached the duty of care to which accounting professionals are held in conducting independent 

audits. Eisner’s auditors had insufficient knowledge of the industry and of the specific inventory 

that they were auditing to evaluate the information provided by Republic; they failed to conduct 

appropriate inquiries or obtain sufficient audit evidence to support the inventory valuation; they 

failed to obtain advice from an industry expert on how to value the hydroxides; they failed to 

follow an auditor’s duty of skepticism; they failed to ensure that Republic had adequate accounting 

controls in place for inventory; all despite the materiality of the inventory at issue and the red-flag

warnings that Republic’s information and representations were false.

37. As a direct result of these failures, Eisner issued its clean audit opinion for 

Republic’s financial statements for the year ended December 31, 2016, even though the balance 

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sheet falsely reported an inventory value of $134.8 million (of which $113.8 million was described 

as silver inventory), mainly consisting of the purported precious metal contents of the drums of 

hydroxide sludge, which were worth only a small fraction of that amount.

38. Eisner’s failures as an auditor were not detected until 2018, in connection with the 

preparation of the year-end financial statements for 2017. For the 2017 financial statements, 

Republic’s CFO, Comite, decided to recompute Republic’s “refinery” inventory based on a lower 

per-barrel valuation. Reducing inventory instantly created a loss for 2017 (lower ending inventory 

means higher “costs of goods sold”). The revaluation and loss raised significant questions with 

Republic’s secured creditors. 

39. On June 8, 2018, Republic hired Eisner to conduct a forensic analysis of its 

inventory and to advise regarding the discrepancies. Specifically, Eisner’s forensic team was hired 

to attend a physical inventory count (occurring on June 9-11, 2018) and compare the inventory 

weights observed to Republic internal reports, which had been the basis for the financial 

statements’ reported inventory figures.

40. Although Eisner’s work done in June 2018 was nominally “forensic” and on a 

“consulting” basis, in fact, Eisner did in 2018 what it should have done for the 2016 year-end audit. 

Its 2018 “forensic” objective, to understand Republic’s inventory processes and count the 

inventory, is indistinguishable from what should have been its “audit” plan and objective a year 

prior.

41. The conclusion of the forensic team was inevitable: Eisner was able to reconcile 

Republic’s finished inventory and other observable components of inventory but was forced to 

exclude the “hydroxide barrels stored in the Warehouse,” from the calculation. As to them, Eisner 

observed that they “required further refining” before a value could be assigned. It noted that the 

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hydroxide barrels were unlabeled and untested, and it directed that Republic “process a selection 

of barrels that we randomly select to identify the actual metal content.”

42. To summarize its finding, Eisner’s forensic team produced the following inventory 

summary for inventory value as of June 2018 – with the line item for “Warehouse (Hydroxide 

Barrels)” blank (“TBD”) because the value could not be determined:

The Lenders’ Reliance on Eisner’s Audits

43. From December 2014 on, Republic funded its working capital needs by drawing on 

credit facilities governed by an Intercreditor Agreement between Republic and a group of financial 

institutions and precious metals lessors, who are either Plaintiffs here or their predecessors in 

interest (collectively, the “Lenders”).

44. The Intercreditor Agreement provided the common framework for the Lenders to 

extend secured credit facilities to Republic in the form of cash loans and precious metals leases. 

The Intercreditor Agreement defined a common borrowing base for the Intercreditor facilities and 

required Republic to provide a Borrowing Base Report at regular intervals. The Intercreditor 

Agreement defined the borrowing base as “an amount equal to the sum of certain asset categories 

of [Republic] (principally accounts receivable and inventory).” The Intercreditor Agreement also 

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enabled the Lenders to share equally in all collateral securing Intercreditor facilities and in all 

recoveries obtained by any Lender. 

45. The Intercreditor Agreement contemplated that some Lenders would potentially 

terminate their participation in the Intercreditor group and that others would join from time-totime. It provided expressly that “[a]ny bank or financial institution which is not a party to this 

Agreement initially may, with the consent of each of the other [Lenders], become a party hereto 

and hereafter be deemed a [Lender] hereunder.” 

46. The Intercreditor Agreement was amended from time to time, including in February 

2016, but at all relevant times contained the provisions discussed in paragraphs 44 and 45.

47. Plaintiff Mitsubishi was a party to the Intercreditor Agreement from December 

2014 and provided Intercreditor credit facilities by leasing gold and silver to Republic. 

48. Mitsubishi received, reviewed, and relied on Eisner’s audit of Republic’s 2016

financial statements in continuing to execute leases of gold and silver to Republic, pursuant to the

Intercreditor credit facilities. At the time of Republic’s bankruptcy petition, Republic owed 

Mitsubishi approximately $54,278,000 under the Intercreditor Agreement metal leases.

49. On February 19, 2016, the Intercreditor Agreement was amended and restated to, 

among other things, add Plaintiff Hapoalim as a party. It was a requirement of the Hapoalim credit 

facility that Republic provide the bank with copies of its annual audited financial statements within

150 days of the close of each fiscal year, “prepared by independent public accountants reasonably 

acceptable to the Bank.”

50. Hapoalim received, reviewed, and relied on Eisner’s audit of Republic’s 2016 

financial statement in continuing to lend money and extending the maturities of existing loans to 

Republic pursuant to the Intercreditor credit facilities. At the time of Republic’s bankruptcy 

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petition, Republic owed Hapoalim approximately $11,373,000 in Intercreditor Agreement loans. 

51. On March 24, 2016, Plaintiff ICBCS became a party to the Intercreditor Agreement. 

52. ICBCS received, reviewed, and relied on Eisner’s audit of Republic’s 2016

financial statements in continuing to lease metal to Republic pursuant to the Intercreditor credit 

facilities. At the time of Republic’s bankruptcy petition, Republic owed ICBCS approximately 

$20,034,000 under Intercreditor Agreement metals leases. 

53. On June 24, 2016, Plaintiff BBH became a party to the Intercreditor Agreement and 

extended credit facilities to Republic. It was a requirement of the BBH credit facility that 

Republic’s annual financial statements be “audited by Crowe Horwath or a firm acceptable to the 

Bank” and provided to BBH within 150 days of the end of each fiscal year. 

54. BBH received, reviewed, and relied on Eisner’s audits of Republic’s 2016 financial 

statements in continuing to lend money to Republic pursuant to the Intercreditor credit facilities. 

At the time of Republic’s bankruptcy petition, Republic owed BBH approximately $9,098,000 

under Intercreditor Agreement loans.

55. On June 27, 2017, Plaintiff Rabobank became a party to the Intercreditor 

Agreement and executed a credit facility with Republic. It was a requirement of the credit facilities

that Republic deliver copies of its audited financial statements to Rabobank within 150 days of the 

fiscal year end.

56. Rabobank received, reviewed, and relied on Eisner’s audit of the Republic’s 2016

financial statements in entering into Intercreditor credit facilities with Republic and in lending 

money to Republic pursuant to these credit facilities. At the time of Republic’s bankruptcy 

petition, Republic owed Rabobank approximately $31,730,000 under Intercreditor Agreement 

loans.

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57. On June 27, 2017, Plaintiff Techemet became a party to the Intercreditor 

Agreement and entered into metal leasing agreements with Republic. It was a requirement of the 

agreements that Republic deliver copies of its annual audited financial statements to Techemet.

58. Techemet received, reviewed, and relied on Eisner’s audit of Republic’s 2016

financial statements in executed leasing agreements, pursuant to the Intercreditor Agreement, with 

Republic and, pursuant to them, leasing metals to Republic. At the time of Republic’s bankruptcy 

petition, Republic owed Techemet approximately $14,477,000 under Intercreditor Agreement 

metals leases.

59. On October 31, 2017, Woodforest became a party to the Intercreditor Agreement 

and executed credit facilities with Republic. It was a requirement of the credit facilities that 

Republic deliver copies of its audited financial statements to Woodforest within 150 days of the 

fiscal year end.

60. Woodforest received, reviewed, and relied on Eisner’s audit of Republic’s 2016

financial statements in entering into Intercreditor credit facilities with Republic and in loaning 

money to Republic pursuant to those facilities. At the time of Republic’s bankruptcy petition, 

Republic owed Woodforest approximately $13,648,000 under Intercreditor Agreement loans.

61. On October 31, 2017, Leumi became a party to the Intercreditor Agreement and 

entered into Intercreditor credit facilities with Republic. It was a requirement of the credit facilities 

that Republic deliver copies of financial statements to Leumi within 150 days of the fiscal year 

end.

62. Leumi received, reviewed, and relied on Eisner’s audit of Republic’s 2016 financial 

statements in entering into Intercreditor credit facilities with Republic and in loaning money to 

Republic pursuant to those facilities. At the time of Republic’s bankruptcy petition, Republic 

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owed Leumi approximately $22,746,000 under Intercreditor Agreement loans.

Eisner’s Duties to The Lenders

63. As Republic’s auditor, Eisner knew that Republic depended on the Intercreditor 

facilities described above, and that Republic would be providing Republic’s audited financial 

statements to the Lenders. 

64. The 2016 audited financial statements note that “In February 2016, the Company 

and various creditors entered into the Second Amended and Restated Intercreditor Agreement 

including notes payable and metal leases” and that “the agreement has been amended and certain 

information on outstanding balances is included below.” The financial statements proceed to note 

the terms of various loans with origination dates of November 15, 2014, January 29, 2016, and 

May 26, 2016, to represent that Republic was in compliance with various financial covenants 

applicable to these credit facilities, to describe Republic’s metals leases with multiple “financial 

institutions,” and to represent the total amount of Republic’s borrowings as of December 31, 2016. 

The audited financial statements also summarize the Intercreditor Agreement’s borrowing base 

and the associated limitations on Republic’s total borrowings. Specifically, the 2016 audited 

financial statements note that “The Company’s borrowings under its agreements with the financial 

institutions are subject to a borrowing base. Total borrowings cannot exceed 90% of the market 

value of its inventory and advances, or 90% of its accounts receivable.” 

65. Given Eisner’s knowledge of the Intercreditor Agreement and related loans and 

leases and their terms, Eisner knew and expected that Republic would share the audited financial 

statements with the Lenders and that the Lenders were relying on them in making lending 

decisions.

66. Indeed, Eisner had direct communications with the Lenders, including to confirm 

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information for purposes of the audit and to substantiate its qualifications and experience to serve 

at Republic’s auditor.

67. Because of Eisner’s knowledge concerning the Lenders and their reliance on the 

audited financial statements, Eisner had a duty of care to the Lenders, which it breached in issuing 

a clean audit for the financial statements described above.

Republic’s Bankruptcy

68. Republic never issued audited financial statements for 2017, and the reduction in 

inventory value ultimately led to Republic’s default under its agreements with the Lenders and to 

Republic’s bankruptcy. 

69. Republic and certain of its affiliates filed voluntary petitions for bankruptcy relief 

on November 2, 2018. At the time of the petition, Republic owed more than $177 million to the 

Lenders who had relied on Eisner’s audits. 

COUNT I

Negligent Misrepresentation

70. Plaintiffs reallege and incorporate each of the allegations set forth in ¶¶ 1 through 

69 as though set forth here in full.

71. Eisner issued an audit report for Republic’s financial statements for 2016 that 

falsely represented Republic’s financial condition, including the value of Republic’s inventory. 

These misrepresentations were material to Republic’s financial condition and to persons relying 

on the audited financial statements.

72. Eisner should have known that the inventory valuation was false, and Eisner failed 

to exercise reasonable care and to conduct reasonable inquiries, as would be expected of an 

independent auditor under the circumstances, to ensure that the valuation was reasonably accurate. 

73. Eisner knew that Republic would transmit the 2016 audited financial statements to 

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the creditors in general and, specifically, to the Lenders, and Eisner thus expected and intended 

that the audited financial statements would reach and would influence such financial institutions

and precious metals lessors. Eisner’s understanding of the Lenders’ reliance on the audited 

financial statements is further evidenced by its written communications with Republic concerning 

the Lenders, and its written communications directly with the Lenders.

74. The Lenders received and justifiably relied on Republic’s 2016 audited financial 

statements.

75. The Lenders relied on the misrepresentations in the 2016 financial statements to 

their detriment in lending money and leasing metal to Republic based on materially false 

representations of Republic’s financial condition and its compliance with covenants. But for the 

misrepresentations of Republic’s financial condition in the audited 2016 financial statements, the 

Lenders would not have extended these loans and leases to Republic and would have terminated 

any outstanding loans or leases.

76. As a result of the Lenders’ reliance on the audited financial statements, Plaintiffs 

have been injured in an amount in excess of $61.5 million. 

COUNT II

Gross Negligence

77. Plaintiffs reallege and incorporate each of the allegations set forth in ¶¶ 1 through 

76 as though set forth here in full.

78. Eisner’s negligence was so extreme that it constituted a reckless indifference to the 

rights of others and, particularly, the Lenders, who loaned and leased millions of dollars and 

precious metals in reliance on the accuracy and validity of Republic’s audited financial statements.

79. Eisner knew that the Lenders, who were extending credit to Republic based on a 

“borrowing base,” for which inventory was a major component, would be relying on Republic’s 

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audited financials.

80. Eisner’s reckless indifference included, among other grossly negligent acts and 

omissions, its issuance of a clean audit opinion for Republic’s 2016 financial statements without 

making any reasonable or discernable effort to assure that Republic had fairly and accurately 

valued the largest and most material asset on its balance sheet, the inventory, or that Republic had 

adequate internal controls to assure the accuracy of management’s accounting for inventory.

81. Eisner’s reckless indifference also included, among other grossly negligent acts and 

omissions, its failure to obtain a basic understanding of Republic’s business and the precious 

metals refining industry before taking on an audit assignment.

82. The Lenders justifiably relied on Eisner’s audit of Republic’s financial statements 

in agreeing to extend credit to Republic and to do so on a secured lending basis.

83. As a result of the Lenders’ reliance on the audited financial statements, Plaintiffs 

have been injured in an amount in excess of $61.5 million. 

COUNT III

Fraud

84. Plaintiffs reallege and incorporate each of the allegations set forth in ¶¶ 1 through 

83 as though set forth here in full.

85. Eisner’s clean audit opinion of Republic Metals 2016 financial statements (i.e., that 

the financial statements present fairly, in all material respects, the financial position of Republic 

as of December 31, 2016) was a false statement in that Eisner’s opinion included the representation 

that it had conducted its audit procedures in accordance with GAAS when it knew that it had not. 

The audit opinion was also false in that Eisner claimed that “the audit evidence we have obtained 

is sufficient and appropriate to provide a basis for our audit opinion.” 

86. Eisner acted recklessly in issuing its audit opinion for Republic. Eisner’s auditing 

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practices were so deficient that the audit amounted to no audit at all. It failed to test the single 

largest item on Republic’s balance sheet: current inventory. It took no steps to verify the quantities, 

weights, and contents of the hydroxide barrels. It unquestionably accepted Republic’s 

methodology for valuing the inventory, without understanding the calculation, much less testing 

its validity. It also observed but failed to react to clear indications that Republic’s methods were 

utterly and obviously deficient, including the very data that Republic’s CFO, Comite, had supplied 

to Eisner to derive its current inventory valuations. Eisner also knew that Republic claimed to 

possess in these 1,973 hydroxide drums nearly 7 million ounces of silver and 15.5 thousand ounces 

of gold, which together would weigh about 437,500 pounds. That translates into 221 pounds of 

precious metal per drum. It would have been clear and obvious to Eisner that drums filled with 

byproducts from the refining process could not possibly contains such massive quantities of 

precious metals. Nor is it feasible that such quantities of precious-metal-rich byproduct could be 

generated within the regular yearly business cycle, raising significant questions about when these 

byproducts were generated and why they were being classified as current assets.

87. Eisner knew that the Lenders, who were extending credit to Republic based on a 

“borrowing base,” for which inventory was a major component, would be relying on Republic’s 

audited financials and the fact that Republic’s financials were being audited.

88. The Lenders, who loaned and leased millions of dollars and precious metals, 

reasonably and justifiably relied on the accuracy and validity of Republic’s audited financial 

statements and on the assurance that an auditor, here Eisner, was auditing their borrower, Republic, 

in accordance with GAAS.

89. The Lenders justifiably relied on Eisner’s audit of Republic’s financial statements 

in agreeing to extend credit to Republic and to do so on a secured lending basis.

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90. But for Eisner’s false statements, the Lenders would not have loaned money, leased 

metals, or extended existing credit facilities to Republic. Eisner’s false statements proximately 

caused the Lenders’ losses.

91. As a result of the Lenders’ reliance on the audited financial statements, Plaintiffs 

have been damaged in an amount in excess of $61.5 million. 

RELIEF REQUESTED

WHEREFORE, Plaintiffs respectfully request judgment on their Complaint as follows:

A. Awarding Plaintiffs compensatory damages in an amount to be determined at trial.

B. Awarding Plaintiffs such other or additional relief as the Court finds to be just and 

proper.

Dated: April 3, 2020 Respectfully Submitted

Andrew T. Solomon

SOLOMON & CRAMER LLP

1441 Broadway, Ste. 6026

New York, New York 10018

(t) 212-884-9102

(f) 516-368-3896

asolomon@solomoncramer.com

And

SCOTT JAY FEDER, P.A.

4649 Ponce de Leon Blvd., Ste. 402

Coral Gables, Florida 33146

(t) 305-669-0060

(f) 305-669-4220

Scottj8@aol.com

assistantscottjfeder@hotmail.com

Attorneys for Plaintiffs

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