Former BDO Seidman chairman and CEO Denis M. Field has filed an appeal with the New York Superior Court’s Appellate Division, asking the court to reverse a state Supreme Court ruling denying his petition to vacate an arbitration decision in favor of BDO Seidman on the grounds that the decision was based on fraud at the firm.
Field was exonerated after a prolonged legal battle in 2013 and alleges that his former firm committed fraud when it failed to disclose to an arbitrator material facts in connection with the firm’s efforts to avoid payment of his legal fees over more than six years (see Former BDO CEO Field Acquitted and Former Lawyer Daugerdas Convicted in Tax-Fraud Scheme Retrial).
Field was acquitted in October 2013 of criminal charges arising from the tax shelter practices of BDO’s Tax Solutions Group in United States v. Daugerdas. In that case, five former BDO partners pled guilty, and BDO 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 innocenceit is time for the firm to acknowledge this failure and fulfill its commitment.”
BDO expects to prevail in the latest appeal. “On three previous occasions, Denis Field has attempted to be reimbursed for legal costs resulting from his promotion of illegal tax shelters,” BDO said in a statement. “Both the courts and the arbitration system have consistently ruled that BDO met all of its financial obligations to Mr. Field. We are confident this latest appeal will receive a similar response.”
In a shift from BDO’s practice of indemnifying current and former partners, in the firm discontinued paying Field’s legal fees in October 2007, despite having made payments until that time. As a result, Field complains he was forced to pay millions of dollars in legal costs out of his own pocket, depleting his assets and leaving him with more than $1 million in outstanding legal fees.
Field initiated arbitration in April 2010 seeking to compel BDO to honor its agreement to pay his legal fees. BDO objected to paying the fees on the grounds that Field withheld draft legal guidance, provided in 2001, that identified possible negative IRS reactions to certain BDO practices and procedures. BDO told the arbitrator that its “discovery” of the legal draft in 2007 prompted its decision to discontinue payments to Field.
However, Field’s legal team claims it has recently uncovered sworn testimony in separate proceedings demonstrating that BDO’s Risk Management Committee was aware of the draft guidance as far back as 2000. Field contends that BDO deceived the arbitrator in order to obtain a favorable award and avoid its commitment to pay the legal fees. His team’s legal filing Monday seeks to vacate the arbitration award, contending it was based on fraud.
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