David Jetuah, Accountancy Age, Thursday 24 June 2010 at 12:44:00

BDO Seidman, the US division of the BDO network gets retrial after judges ruled the original trial was unlawful


BDO Seidman, the US member of the BDO International network has been given a fresh chance to defend itself against negligence claims in a $521m (347m) legal dispute.

Appeal judges decided that the original case in 2007 was flawed, ordering the case to be retried.

BDO Seidman said today: "The Third District Court of Appeal of the state of Florida has unanimously overturned a 2007 jury verdict against the firm and ordered that the case be retried in the 11th Circuit Court."

The Court of Appeal concluded that the trial court had prejudiced the case by allowing evidenceto be presented in three phases.

This allowed the jury to find BDO "grossly negligent without, at the same time, considering the conduct of other actors, including representatives of Banco Espirito Santo," BDO Seidman said.

Banco Espirito owned Bankest, the factoring company at the heart of the dispute.

BDO Seidman was fighting claims of gross negligence levelled by Banco Espirito for its audit of Bankest.

The appeals court said "the evidence of reliance on BDO's audit opinions was insufficient to sustain the claims of the Bankest investors, save for the one individual who testified at trial, and that the trial court improperly allowed into evidence prejudicial hearsay testimony and documents which further served to deprive BDO of a fair trial."

The Appellate Court added, "We have carefully considered every substantive and procedural authority that might be applied to preserve at least some of the jury?s findings. In this case, no such balm is found."

BDO Seidman chief executive Jack Weisbaum welcomed the appeals court decision.

"We have consistently stated that we were confident that the jury?s erroneous verdict in this case would be reversed on appeal.

"The addition of punitive damages at the time only served to emphasize the injustice that took place at the trial court."

Weisbaum vowed the retrial would give the firm the chance to show it acted consistently at all times with its professional obligations and that its audit opinions were based on the proper application of generally accepted auditing standards.

Steven Thomas lead counsel for plaintiffs Banco Espirito Santo said:

"We are pleased that the effort and hard work the jury put into this case was recognized by the appellate court, and we specifically note that the court did not dispute BDO unethical conflicts of interest or its negligence.

"The evidence of BDO Seidman?s failures of even the most basic auditing procedures is so overwhelming that we expect a new jury will reach the same conclusion as the original jury."

"We look forward to trying this case and reminding everyone of BDO Seidman?s neglect of its public duty and the enormous conflict of interest they had.?

Further reading:

The Appeal Court's decision documents