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February 1, 2011

BDO ordered to pay $91m in damages

BDO US will appeal a Florida Court ruling to pay $91m in damages over allegedly concealing information during an audit of bankrupt real estate company Grand Court.

BDO has been ordered by a Florida Court to pay $55m in punitive damages and $36m in compensatory damages for helping to cover up problems with the financial statements of Grand Court, a company George Batchelor had invested in.

When Batchelor died in 2002 his estate and foundation filed the lawsuit against BDO and original auditor Deloitte.

In 2000, publicly listed real estate company Grand Court went bankrupt. Batchelor’s attorney Steven Thomas claimed Grand Court had sought a new audit opinion on its financial statements when it was unable to get a clean opinion from Deloitte.

BDO said it “strongly” disagrees with jury’s decision “as there were numerous reversible errors made by the court during this trial” and “BDO’s audits of Grand Court conformed to all generally accepted auditing standards”.

BDO claims Grand Court was only a brief client of the firms New York office in the late 1990s. The company said in a sworn deposition prior to his death Batchelor had not mentioned BDO among a list of professionals and associates he relied on in making his decision to invest in Grand Court.

The firm added the vast majority of Batchelor’s investments took place prior to BDO issuing its audit opinion on 3 May 1999 with Batchelor Foundation’s sole investment taking place seven months before BDO was hired and more than a year before an audit was issued.

According to media reports, Deloitte settled with the Batchelor Foundation.

 

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