BDO Seidman was ordered to pay $170 million in compensation and $350 million in punitive damages by a Florida jury that blamed the accounting firm for negligence in failing to uncover fraud in its audits of a financial services company.
The case involved E.S. Bankest LLC, which went bankrupt and left one of its backers, the Portuguese bank Banco Espirito Santo, with massive losses. BDO had audited the company and showed Bankest tripling its income from 1995 to 1996, which induced Banco Espirito Santo to enter into a partnership with Bankest. Bankest used a financial scheme called "factoring" to create fraudulent loans. Seven people, including two Bankest directors, have been convicted of fraud and received jail sentences.
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