Former BDO Seidman chairman Denis M. Field, who was acquitted last year following a prolonged legal battle in a major federal criminal tax shelter case, said Friday he has filed a motion to vacate an arbitration decision in favor of BDO Seidman because it was based on fraud by the firm.
In the motion, filed in New York State Supreme Court, Field alleged that the arbitration decision, which allowed BDO Seidman to avoid payment of Field’s legal fees over a period of more than six years, defrauded the arbitrator by failing to disclose material facts that would have affected the arbitrator’s decision. In addition to the fees he has already paid, Field claims he still owes more than $1 million in outstanding legal fees.
BDO responded that Field’s legal motion is destined to fail. “This is merely the latest effort by Denis Field to be reimbursed for legal costs resulting from his promotion of illegal tax shelters,” BDO said in a statement forwarded by a spokesman. “An arbitrator has previously ruled that BDO met all of its financial obligations to Mr. Field and a subsequent challenge by Mr. Field in New York State Court to overturn the arbitrator’s decision was unsuccessful. This latest effort by Mr. Field will also fail as the governing law and the facts of the case have not changed.”
Field was acquitted last fall of all criminal charges arising from the tax shelter practices of BDO’s Tax Solutions Group in United States v. Daugerdas (see Former BDO CEO Field Acquitted and Former Lawyer Daugerdas Convicted in Tax-Fraud Scheme Retrial). In the case, five former BDO partners pled guilty, and the firm itself acknowledged criminal wrongdoing in a deferred prosecution agreement that required BDO to pay a $50 million fine.
“Though I will never recover the time, effort and economic investment that have been lost due to this case, I am forever grateful that the jury’s verdict confirmed my innocence,” Field said in a statement. “As I work to rebuild my reputation and career, I am left with millions of dollars in legal fees. BDO’s dishonest behavior and abdication of responsibility must not be ignored. BDO abandoned me despite my innocence—it is time for the firm to acknowledge this failure and fulfill its commitment.”
BDO stopped paying Field’s legal fees in October 2007 in a shift from what Field contends was the firm’s longstanding practice of indemnifying current and former partners, As a result, Field claims he was forced to pay millions of dollars in legal costs out of his own pocket, depleting his assets and leaving him with significant outstanding legal fees.
Field initiated arbitration in April 2010 in an effort to compel BDO to honor its agreement to pay his legal fees. The firm objected to paying the fees on the grounds that Field had withheld draft legal guidance that he was provided in 2001, describing possible negative reactions from the Internal Revenue Service to certain BDO practices and procedures. BDO told the arbitrator that its alleged “discovery” of the legal draft in 2007 prompted its decision to discontinue payments to him.
However, Field contends that his legal team has recently uncovered sworn testimony showing that BDO’s Risk Management Committee was aware of the draft guidance as far back as 2001. In concealing this fact, he claims that BDO succeeded in deceiving the arbitrator in order to obtain a favorable award and avoid its commitment to provide for his legal fees. In light of this evidence, his legal filing Friday seeks to vacate the arbitration award because it was based on what Field alleges is BDO’s fraud.
Field’s representatives pointed out that the cost of defending an individual in a complex white-collar case is extraordinary, and that individuals rely on the promises made by their companies or firms to indemnify them for such legal costs. “Reneging on such commitments makes it difficult, if not impossible, for individuals to mount a vigorous defense,” they wrote in announcing the legal motion. “Because BDO withdrew its financial support from Mr. Field, he was unable to ensure that his trial counsel was compensated for its efforts. In addition, because Mr. Field won a retrial and had to rely on court-appointed counsel in that retrial, BDO’s actions resulted in the government paying for legal fees that BDO, in the absence of its fraud on the arbitrator, would have been obligated to pay.”
Field’s team has posted the court documents online at http://www.bromwichgroup.com/denis-field.