A $170-million malpractice suit against BDO Seidman kicked off in a Miami court last week.
The lawsuit, brought by Portuguese bank Banco Espirito Santo, alleges that BDO failed to find key warning signs that financial services company E.S. Bankest was hiding fraudulent business practices. The company declared bankruptcy in 2004 and Espirito is its largest creditor.
BDO has denied all of the allegations, saying that the fault lies with the officers and managers of the bank and that the case could prove to be a matter of corporate life or death. In a legal filing last fall, the firm said that the jury awarding the full amount could lead to it, “forgoing its position as one of the top accounting firms in the United States, and to the displacement of thousands of accountants, auditors and staff."
Seven people, including Bankest directors Eduardo and Hector Orlansky, have already been convicted in federal court of criminal fraud charges and sentenced to prison. Bankest was a factoring firm, buying other companies' receivables at a discount to their face value in the hope of profiting by collecting on the bills.
However, the criminal trial found that Bankest's executives falsely inflated the value of the receivables they bought, using the receivables as collateral for loans.
Over the past dozen years, BDO's U.S. arm has taken six cases to trial and won all of them.
