An appeals court has overturned a $521.7 million jury verdict against BDO Seidman in a case brought by Portugals Banco Espirito Santo International.
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The Third District Court of Appeal of the State of Florida unanimously overturned the 2007 jury verdict against the firm for failing to detect a fraud and ordered that the case be retried in the 1st Circuit Court.
The bank had sued BDO in 2004 alleging that the firm had certified millions of dollars in bogus accounts receivable at a joint venture the bank had set up in 1998 with Bankest Capital. Jurors found in favor of Banco Espirito Santo in 2007, but the appeals court ruled Wednesday that the jury had been confused by the three-part trial, which stretched out over a four-month period in a Miami courtroom.
The appeals court concluded that the trial court erred in its original decision to trifurcate the trial. The court ruled that it was prejudicial to have allowed the case to be presented in three phases, which allowed the jury to find BDO grossly negligent without, at the same time, considering the conduct of other actors, including representatives of Banco Espirito Santo.
The appellate court further concluded that the evidence of reliance on BDOs audit opinions was insufficient to sustain the claims of the Bankest investors, except for one individual who testified at trial, and that the trial court improperly allowed prejudicial hearsay testimony and documents into evidence, depriving BDO of a fair trial.
The appellate court concluded in its ruling, We have carefully considered every substantive and procedural authority that might be applied to preserve at least some of the jurys findings. In this case, however, no such balm is found.
BDO welcomed the verdict. We are very pleased that the appeals court has reversed the lower court verdict, said BDO CEO Jack Weisbaum in a statement. We have consistently stated that we were confident that the jurys erroneous verdict in this case would be reversed on appeal. The addition of punitive damages at the time only served to emphasize the injustice that took place at the trial court. A new trial will be in accordance with the Court of Appeals decision and we will prove that BDO acted at all times consistent with its professional obligations and that its audit opinions were based on the proper application of generally accepted auditing standards.