The Washington Post reports that BDO Seidman has been slammed with a $521 million total settlement including $351 million in punitive damages arising out of the ES Bankest negligence case. If the damages are upheld, this could seriously affect BDO’s ability to continue in its current form:
In testimony Tuesday, BDO Seidman attorney Adam Cole asked the company’s chief executive, Jack Weisbaum, whether the firm’s financial operations would stay the same if it had to pay punitive damages.
“Probably not,” Weisbaum said. “It would be very difficult. We certainly wouldn’t look the way we do now.”
BDO will appeal but in the meantime has posted a $50 million bond. Figures presented at the trial show that BDO had net worth of $171 million while the firm’s website says total fee income to June, 2007 was $589 million.
While the jury was instructed not to make a settlement that would kill off the firm, it is hard to see how BDO will survive in its present form, assuming of course that the judgment is upheld. A report in the Herald Tribune said that:
Banco Espirito Santo attorney Steven Thomas suggested that the firm may be able to handle the punitive damages if it makes some salary cuts among its 250 highly-paid partners, whom Weisbaum [BDO CEO] said receive an average of about $500,000 a year.
Regardless of the outcome, this has to be one of the most serious cases to impact the profession in recent times. At least as serious as the KPMG $456 million fraud case settlement.
