BDO and Banco Espirito Santo - a relationship gone bad?
Later this year lawyers for Banco Espirito Santo will go before a US jury to argue that BDO International should be liable for damages awarded against member firm BDO Seidman
Later this year lawyers for Banco Espirito Santo will go before a US jury to argue that BDO International should be liable for damages awarded against member firm BDO Seidman
In a ruling against Seidman, in Miami, a court found against the firm over
the audit of ES Bankest, a factoring company owned by Banco Espirito. The
damages amount to $500m (£250m).
But the lawyers for the Portuguese bank want to demonstrate that BDO
International is liable for the damages because the umbrella body allegedly
‘controls’ member firms. This way they believe they will guarantee getting their
money. But the lawyers have now said that if they win the jury’s approval the
ruling will have implications for most large international network umbrella
bodies.
The case is still to be proven, but the thought must send a chill down the
spine of network managers that have member firms in the US. Suddenly the risks
of being in a network could be much higher than orginally thought, and faith in
the isolation of risk could be shattered. Global firms might need to rethink
relations with network members across the Atlantic, already considered the
riskiest part of the network, and structural change would have to be carefully
considered.
The BDO case must be giving network senior partners sleepless nights and it
would be no surprise to learn that there is a latent wish out there that BDO
would simply settle out of court before a ruling sets an uncomfortable
precedent.
Mostly, however, this prospect could be a good reason for firms to reconsider
their own internal risk management and work on laying to rest the long standing
accusation from detractors that they hold themselves out to be one thing, while
operating in an entirely different manner.