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Judge Tosses $352 Million Award in Accounting Negligence Suit Against BDO International
Daily Business Review
June 17, 2009
Belgium-based BDO International no longer risks paying a $352 million punitive damage award under a ruling in a civil negligence case brought by Espirito Santo Bank.
Miami-Dade Circuit Judge John Schlesinger ruled for the accounting network from the bench Monday and reaffirmed his decision Tuesday when the bank asked him to reconsider.
The punitive award was part of a $522 million verdict two years ago against Chicago-based BDO Seidman for its audits of a fraudulent Miami factoring business co-owned by the bank. The award is the largest ever against a U.S. accounting firm.
The ruling leaves the BDO International jury to decide whether it should share liability with BDO Seidman for $170 million in compensatory damages.
"It's obviously very gratifying to my client that they weren't even negligent, let alone grossly negligent," said BDO International attorney Mark Raymond, who is a managing partner with Broad and Cassel in Miami. "We spent a lot of time having to defend our honor, and it's unfortunate that it's had to take this long."
The Portuguese bank's attorney, Venice, Calif., lawyer Steven Thomas of Thomas Alexander & Forrester, said by e-mail, "We believe the jury should have been given the opportunity to hold BDO International responsible for the punitive damages already awarded."
The judge issued a directed verdict in favor of BDO International on the punitive issue.
"I don't believe the facts are in the neighborhood of adequacy to support punitive damages against BDO International," the judge said in court Monday, according to a transcript. "They're entitled to a judgment as a matter of law on the directed verdict."
The trial is now in its third week with jurors knee-deep in corporate audits, European incorporation documents and other papers bearing the BDO marquee.
The bank has rested, and BDO International is presenting its defense. Closing arguments are expected to begin this afternoon.
Espirito Santo contends BDO Seidman was an agent of BDO International when it failed to catch a $170 million fraud while auditing E.S. Bankest from 1998 to 2002. The bank, part owner of Bankest, was the victim of the biggest bank fraud in Miami history.
The bank contends BDO International had a responsibility to control BDO Seidman when the fraud took place. BDO International disputes the bank's contentions and denies it had supervisory control over BDO Seidman.
Instead, BDO International maintains it provides administrative services to a network of independent member accounting and consulting firms that are separate legal entities.
The new jury has not been told about the dollar award by the 2007 jury. It will be asked whether BDO Seidman is an agent of BDO International.
The $522 million award against BDO Seidman is on appeal to the 3rd District Court of Appeal.
BDO International was dropped as a defendant in the 2007 trial, but the 3rd DCA said send it back, saying a jury must answer the agency question.
