A malpractice suit has been filed against BDO Seidman and two of its CPA partners, alleging that the firm engaged in unfair business practices and securities fraud in connection with the 2004 bankruptcy of a Miami financial services company, E.S. Bankest.

Lawyers speaking for federal court-appointed E.S. Bankest officer, forensic accountant Lewis B. Freeman, wrote in their filing that Freeman "discovered in five minutes what BDO failed to discover in five years -- that over $1 billion of the accounts receivable BDO certified did not exist."

The suit, seeking $170 million, was filed in the U.S. Bankruptcy Court for the Southern District of Florida, and is the second to be filed against BDO out of the bank's failure.

BDO has denied all of the allegations. In a statement, the accounting firm said the fault lies with the officers and managers of the bank, many who have pleaded guilty to fraud or are awaiting trial. "These misleading accusations, that draw ridiculous comparisons to Enron, suggest an absence of hard evidence and a motive to litigate by press relase," the firm said, in a statement. "BDO remains confident that it will prevail in a court of law."

Bankest was owned by Espirito Santo Bank and Bankest Capital Corp., both controlled by brothers Hector and Eduardo Orlansky. The U.S. Department of Justice charged the Orlanskys with bank fraud in 2003, and Bankest was forced to declare bankruptcy. The brothers' criminal trial is scheduled to begin in March.

BDO and partners Sandor Lenner and Keith Ellenberg are also accused of self-dealing and having conflicts of interest in the engagement. The suit said that in five separate audit opinions, the two declared that Bankest's audited financial statements contained no material misstatements and that no material fraud existed.

Bankest's largest creditor is Espirito Santo Bank, which is still owed more than $160 million. Espirito also sued BDO Seidman to collect $170 million in a case that is scheduled to go to trial in September.

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This story was updated 2/27/06 to include quotes from BDO Seidman's statement on the matter.

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