I usually stick to commenting on the Big 4, but I was struck by a comment made by Christopher Ames over at his blog. He mentioned that BDO had been bucking the trend and fighting instead of settling. According to him and the WSJ, BDO had taken six cases to trial in the last twelve years and won all of them.
Looks like, unfortunately, they’ve “bet the farm” for the last time.
“In a verdict that could have severe consequences for BDO Seidman, a Miami jury on Friday decided the world’s fifth largest accounting firm was negligent in failing to detect a massive fraud that cost a Portuguese bank $170 million.
Banco Espirito Santo had sued BDO Seidman in 2004 over the collapse of a financial services firm, E.S. Bankest, that the bank helped start. BDO Seidman was E.S. Bankest’s auditor for seven years.
The Miami-Dade Circuit jury found that BDO Seidman committed gross negligence, meaning the firm acted with reckless disregard of its duties. The finding allows Espirito Santo to pursue punitive damages of as much as $510 million. The same jury will decide just how money Espirito Santo gets in the second phase of the trial, which starts next week. It took the jury three hours to reach a verdict, after a trial of more than two months.
Chicago-based BDO Seidman has vowed to appeal. In court papers filed last fall, it said a jury verdict for just the $170 million in losses claimed by Espirito Santo could lead to job losses for thousands of its accountants, auditors and staff.
Steven Thomas, a Los Angeles lawyer who represents Espirito Santo, said he was pleased with the verdict…Stanley Foodman, a Miami forensic accountant not involved in the case, said BDO Seidman wasn’t exaggerating when it claimed a huge award could have major implications. ”The future of the firm is essentially in the hands of the jury,” Foodman said.”