BDO under fire over delays to $521m case

A trial lawyer has expressed frustration with BDO International after the network umbrella body secured a seventh postponement to a court hearing which would decide whether the global body should be held liable in a $521m (£360m) audit negligence case.

The case was set to go ahead on 17 February, but a Miami judge ruled the case should be shelved until 26 May after BDO tabled a ‘motion to stay’ the case.

Lawyers believe the case could set a precedent for international networks and relations with their members around the world.

The issue relates to US firm BDO Seidman’s audit of Bankest, a factoring company owned by Banco Espirito Santo, a Portuguese bank. Steven Thomas, lead lawyer for Banco Espirito Santo, said: ‘They have done everything they could to put off this trial. BDO has brought six different motions to stay the case before this one.’

Seidman was accused of negligence in its audit after Bankest directors created fictitious cheques, invoices and companies to inflate the value of account receivables to support a $170m (£120m) fraud.

The umbrella body has been caught up in the scandal for a second time because BDO Seidman is appealing against the damages.

A trial judge originally decided BDO International should not be held liable, but the appeal process has meant that BDO International will have to convince a jury it should be kept out of the affair. ‘Why should firms get special treatment? If anything they should be held to higher standards than other professional services firms,’ said Thomas.

BDO International’s defence has always centred on the fact that the umbrella body only has 10 employees and the audits conducted by member firms are done independently. BDO International has said it has no control over its audits and should therefore not be held responsible.

Jeremy Newman the CEO of BDO International would not comment on the issue.