$91.7 Million Jury Verdict against BDO

By Allison Schiff - NYSSCPA.org

February 2, 2011 - 

In the latest verdict to come out of the nine-year legal battle between BDO Seidman LLP and the estate of aviation pioneer George Batchelor, a Miami jury on Jan. 31 ordered BDO to pay more than $91 million in punitive and compensatory damages for fraud and negligence in the auditing of a now-bankrupt housing developer in which Batchelor had invested, reports The Miami Herald.

According to The Wall Street Journal, Batchelor, also a renowned philanthropist, had sunk “tens of millions” into BDO client Grand Court Lifestyles, Inc. Grand Court went bust in 2000. The Batchelor lawsuit accuses BDO of engaging in careless auditing practices that kept the developer’s financial problems under wraps until it was too late.

Before BDO, Grand Court used Deloitte & Touche, LLP as its auditor, though the latter was, says the lawsuit, “fired because it disagreed with Grand Court about accounting procedures” and “insisted on appraising the value of all of Grand Court’s multi-family homes, rather than just a sampling of properties.”

According to the suit, Deloitte was replaced by BDO because it “allegedly agreed to use the less costly sampling method.” Deloitte settled with the Batchelor Foundation out of court, says the Herald.

In its defense, BDO claimed that Batchelor, who died in 2002 at age 81 -- the same year the lawsuit was brought -- made the majority of his investments in Grand Court before BDO issued its audit, says the Journal.

The $91.7 million verdict in Batchelor’s favor wasn’t the first. According to the Journal, just last year a Florida appeals court tossed out a $521 million jury verdict against BDO.

The South Florida Business Journal reports that BDO doesn't plan to take this verdict as the final word. “We strongly disagree with the jury’s decision," BDO said in a statement after the verdict, "and we are confident the verdict will be reversed on appeal as there were numerous reversible errors made by the court during this trial.”