Tramp After Hours: Banco Espirito v. BDO Round 1

Duped Bank vs. Negligent CPA's. Round 1.

Much like Rocky vs. Drago, the life of BDO (Rocky?) may be on the line. Tramp will act as a ringside judge. Enter the lawyers:

For Banco Espirito, it's fundamentals: "'BDO International was grossly negligent,' said Steven Thomas, an attorney for Banco Espirito Santo. 'They were supposed to make sure their BDO firm here in Miami was doing its job.'''

BDO counsel took a different approach: '''Confusion creeps in because of the similarity in names,' Mark Raymond, a lawyer for Belgium-based BDO International, told jurors."

He continues: '''Like a wedding planner, they coordinate, they facilitate,' Raymond said. 'Does a bride give the wedding planner all of these rights to run and control everything? Of course not.'"

Round goes to: BDO - We are talking about a south Florida jury here. Most of the jurors are probably old with Medicare-funded hearing aids so confusion is a given.

Plus, all the fundamentalist Christians and religious Jews down there do love themselves some weddings and they all know that the wedding coordinator is NOT in charge.

The other poss is that jurors are alcoholics/addicts too fucked up to pay attention because they lost their ass on the beachside condos.

Hypothetical exchange during jury selection:

Potential Juror (on cell phone in slurring speech): You promised me they would sell! You fucking promised me!

Judge: Ahem!

Potential Juror: Excuse me? Oh, sorry. No, I don't have any idea what a global network of accounting firms is.

Defense Counsel: I have no problem with this juror, your honor.

Well played counselor. Updates will continue.

Banco Espirito Santo wants firm held liable for jury verdict [Miami Herald] Sphere: Related Content

In this Corner...BDO Seidman

It's more like a welterweight match but anyhoo...Opening statements were scheduled to be given in Banco Espirito v. BDO International in Miami today.

For those needing a refresher, BDO has been ordered to pay $521M to Banco Espirito after the Portuguese bank got duped out of $170M by the factoring (sketchy loans) company E.S. Bankest. New York Times coverage here and re: The Auditors here.

A jury found BDO guilty of negligence, and the firm was ordered to pay compensatory damages of $170M and $351M in punitive. The awards could potentially put BDO out on its ass.

The issue in this case is to decide if the "local" firm was acting as an agent of the international firm. If so found, the entire international network of BDO firms may be found liable for the judgment found against BDO.

Ouch.

This has big implications for all international firms, most currently for PwC who might find itself in a similar sitch with Satyam

Stay tuned.

Fla. jury to decide if BDO International liable [WEAR ABC 3] Sphere: Related Content

The Stank of Desperation

So the FB4 is begging, nay, pleading for protection from the British government because a "blockbuster lawsuit" could put one of them right next to Arthur Andersen in the auditor graveyard.

Ok, so we've all gotten used to large companies asking the government for things but this new low in corporate pan handling is especially pathetic.

"[A lawsuit] could trigger the collapse of the audit market and cause chaos for business". Ok, so now the audit firms think they are too big important to fail?

So the usual suspects provided flimsy pieces of paper that state that they performed procedures (on a test basis) to ensure that the financial statements were in accordance with GAAP. Oh, and that small bit about how there was nothing materially misstated on said financial statements.

Welllllll, it turns out some pretty important stuff wasn't in accordance with GAAP and the financial statements were materially misstated when the super-duper auditors said they were a-ok. Now they want the government to protect them so they can continue to suck at their jobs.

Appears reasonable.

Auditors Not Trying To Wiggle Off The Hook. Really. [re: The Auditors] Sphere: Related Content

Links 4/15/2009 - Happy Tax Day!

Yeah. Good luck with that. [Zero Hedge]

I've got believe this is grounded in some truth. Practice makes perfect! [The Onion]

I itemized for the first time every in 2008 and it was because I paid so much tax to NYS and NYC [Zero Hedge]

Bernie Madoff's auditor may have a fan. Or at least a sympathizer. [Skeptical CPA] Sphere: Related Content

This Could Potentially Replace Guiding Light as the New Daytime Drama

Reuters and Financial Week are both reporting on New Century's (or what's left of it) lawsuit against KPMG that was filed today in Los Angeles and New York. The plaintiffs are seeking $1 Billion in damages.

One highlight mentioned is an excerpt from an email that the engagement partner sent to a specialist working on the engagement, “As far as I am concerned, we are done. The client thinks we are done. All we are going to do is piss everybody off.”

This was sent the night before the 10-K was to be issued. This is not a surprising statement or situation for anyone that has worked in a FB4 atmosphere. Integrity at its best people.

Not sure what's going to come of this but you'll be sure to get updates.

KPMG faces fallout from New Century [Financial Week]

KPMG hit with lawsuit over New Century collapse [Reuters] Sphere: Related Content