BDO LOSES MIAMI AUDIT CASE
MIAMI - BDO Seidman was ordered to pay $170 million in compensation and $350 million in punitive damages by a Florida jury that blamed the firm for negligence in failing to uncover fraud in its audits of financial services company 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 Bankest and showed the company 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.
BDO Seidman said that the amount of the award could lead to huge layoffs and hurt its standing as one of the top accounting firms. The firm said it would appeal the decision and that it has a history of successfully appealing jury decisions in Florida.
"BDO Seidman respectfully but forcefully disagrees with this verdict," the firm said in a statement.
COURT ORDERS END TO TAX PROTEST SCHEME
BINGHAMTON, N.Y. - A federal court has permanently barred a Queensbury, N.Y., man, Robert L. Schulz, and his organizations, We the People Congress and We the People Foundation, from promoting a tax scheme that encouraged businesses to stop withholding taxes from their employees' wages.
U.S. District Judge Thomas J. McAvoy said that Schulz and his foundations "relied on fringe opinions of known tax protestors whose theories have repeatedly been rejected by courts across the country." They promoted a tax scheme known as the Tax Termination Package.
The court also told Schulz to give the Justice Department a list of all the names, addresses, phone numbers and Social Security numbers of his customers.
The court estimated that the U.S. Treasury has lost $4 million as a result of the scheme.
JUDGE BARS JACKSON HEWITT PREPARERS
ATLANTA - An Atlanta federal court has permanently barred two Jackson Hewitt franchise employees from preparing taxes for others.
Judge Clarence Cooper of the U.S. District Court for the Northern District of Georgia issued a permanent injunction against Hileah Braxton and Tameka Donaldson of Smart Tax of Georgia, one of four Jackson Hewitt franchises sued by the Justice Department in early April over allegations of widespread fraud.
The other franchises were located in Chicago, Detroit and Raleigh-Durham.
The DOJ alleged that fraudulent tax preparation flourished at the franchises. Among the practices the government uncovered in the four cases were filing false tax returns claiming refunds based on phony W-2 forms, using fabricated businesses and business expenses on returns, wrongly claiming fuel tax credits for customers, and misusing the Earned Income Tax Credit.
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