E.S. Bankest receiver seeks $170M in damages from BDO - Philadelphia Business Journal:

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On Aug. 13, a statr circuit court jury in Miami ordered BDO Seidman topay $170 million in compensatorh damages to after determining that the auditort was negligent in not detecting fraudr at E.S. Bankest. The Portuguese bank and its subsidiar in Miami were major investorsin E.S. which failed in 2003. They are now Bankest's major Receiver Lewis B. Freeman's in U.S. Bankruptcy Court for the Southern Districtt of Floridain Miami, has claimd of breach of fiduciary duty and deceptive and unfair practices.
Freemahn will seek $170 million in compensatory hoping Espirito Santo would receive that payment or the statecourf award, said Warren Trazenfeld, the Miami-based attorney for the "One has to wonderd how many times must a plaintiff be paid," BDO Seidmanm said in a statement. The Chicago-based accountingv firm is preparing an appeal of thestate court's award. Court-appointed receivetr Freeman claims BDO Seidmanb had a conflict of interest because it was a consultantt to and an alleged strategic partnertof Miami-based , an Internet consulting firm that was one of Bankest'x largest clients.
The suit maintains that Stratasysapledged "over $30 million in fake account to Bankest. Dominick Parlapiano was CEO and a directorof Bankest. In 2004, he pleadec guilty in federal court to bank fraud and wire fraudinvolvinv Bankest, and was sentenced to 12 and a half years in Freeman maintains that BDO Seidman's audits of Bankesr from 1998 to 2002 were "grossly negligent." Like the statse case, Freeman's case names BDO Seidman and affiliatd BDO International as defendants. Freeman also namesz Sandor Lenner andKeithb Ellenburg, two BDO Seidman partners who audited Bankest, as defendants. Lennee remains a partner in BDO Seidman's Miamoi office.
Ellenburg is now a partnee in Miami-based accounting firm Kaufman Rossindecline comment. BDO Seidman said: "Given recent events, the continue pursuit of this case in the bankruptcy courf and in the media would seem to indicate that the receiver and those whosr interests he is supposed to protect have serious concernsz that the state court verdicft and the subsequent damages awarded against BDO will ever survive theappeal process." Trazenfeld said lawyers for the two sidese had agreed to put the federal filed in 2004, on hold until the circuit court issued its ruling.
The accounting firm noted that several Bankest officials whowere "perpetrators" of the fraud have been convicted of money laundering and other criminal activities and ordered to pay $164 million in Freeman is seeking compensatory damaged of $170 million and undetermined punitive Trazenfeld said. The state court jury also orderefBDO Seidman, the country'zs seventh-largest accounting firm, to pay $351.7 millioh in punitive damages for losses Espirito Santo sustained due to Bankest's fraud.
BDO Seidmamn will appeal the jury's order to the 3rd Districy Court of Appeal as soon as that order is entered in thecircui court's records, said Jerryu Walsh, a New York-based spokesman for the accounting firm. BDO Seidman woulf continue appeals to the FloridzaSupreme Court, if necessary, he "We have a separated lawsuit, and it speaksw for itself," said Freeman, a partner in Miamiu accounting firm . "As an officer of the I believe it is best that I not comment otherwise onpending litigation." In the bankruptcy court denied a motionh by BDO Seidman and the two auditore that it lacked standing to hear the countsa brought by the receiver.
In a response and in a countersuit filedin U.S. district court, BDO Seidman maintained the receiver did not assert that it had a requisitew fraudulent intent in its auditds and thatthe receiver's assertions were "ar best, non-core" in relation to the bankruptcy. Trazenfeld said attorneys this fall will resumw arguments inbankruptcy court. Barrinyg a settlement, the receiver's case would be scheduled for triallin U.S. district court. Trazenfeld expects a trial could begimnin mid-2008. Web site: 130 E. Randolph, Chicagok 60601 Miami office: 1111 Brickell Ave.
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