As previously discussed here on this blog, in June 2009, BDO International received a favorable jury verdict that cleared it from responsibility for part of a $521.7 million verdict against BDO Seidman LLP concerning allegedly negligent audits. The jury found that BDO International did not control U.S. member firm BDO Seidman LLP, which in August 2007 was required by another jury to pay $170 million in compensatory damages to Banco Espirito, Portugal’s third-largest bank, and $351.7 million in punitive damages.
BDO International's victory, however, did nothing to erase the fact that BDO Seidman was still on the hook for the $521.7 million verdict. Last week, however, BDO Seidman finally got its chance to be heard in an appeal of that verdict in the Florida 3rd District Court of Appeal in Miami.
As a refresher on the underlying case, Banco Espirito Santo International Ltd., Banco Espirito Santo S.A., and ESB Finance all invested in a company called E.S. Bankest L.C. As discussed here by Going Concern, BDO was the auditor of Bankest while massive fraud concerning accounts receivable occurred. Banco Espirito discovered the fraud, Bankest went bankrupt (and their executives went to jail) and Banco Espirito lost millions, Going Concern reports.
Attorney Steven Thomas represents Banco Espirito and told Going Concern that BDO is arguing the technical point that the case should not have been bifurcated at trial, rather than attacking the findings of malpractice and gross negligence. BDO has reportedly indicated that it will further appeal to the Florida Supreme Court, if necessary, and well it should. As Francine McKenna reported back in June 2009, BDO has acknowledged that it does not have $521 million available as a US firm, and that paying such a judgment would break the US firm.
- Thought Leadership