BDO Seidman Nears End of Case Involving Criminal Charges

On Monday, June 24, 2002, BDO Seidman will take another step toward removal of the criminal charges facing the firm. This is the date when a federal judge is scheduled to determine the formula for compensating the victims in the firm's failure-to-report-an-illegal-act case. According to a report published in the New York Times, the case against BDO is similar in the Andersen case in that it involved criminal charges, but it received much less publicity and BDO is not barred from practice.

Federal officials have charged that BDO knew, but did not report to the Internal Revenue Service, that an investment adviser client had misappropriated $65 million from his clients. Curiously, this might well have been the charge the jury was thinking of when it convicted Andersen of obstruction of justice. In a strange twist of fate, Andersen's jury found no evidence of the alleged illegal destruction of documents but instead convicted the firm for editing an internal memo so it would be more accurate and would not be erroneously construed as concealing an illegal act. The Times reports other similarities to the Enron/Andersen case:

  • Like Enron, the former investment adviser's business failed.
  • Like Andersen, BDO has been involved in mishaps in the past. Accounting problems at Leslie Fay led to a raft of shareholder suits in the mid-1990's, and BDO served as auditor for Jennifer Convertibles during the years for which its earnings needed to be restated.
  • Like Andersen, the entire BDO firm was charged rather than individual partners. Hal Goldsmith, an assistant U.S. and a prosecutor in the case, told the Times his office charged the entire firm with the crime because "there was knowledge in the partnership" in the St. Louis office that the client had misappropriated the money and the firm did nothing about it.

BDO avoided being banned by the Securities and Exchange Commission from auditing publicly traded companies through a pretrial agreement. In April 2002, BDO agreed to make a $16 million contribution to settle the charges. BDO's outside counsel explains, "Once BDO makes restitution, the charges are withdrawn and there's no criminal record." An official at the SEC, who would not speak for attribution, told the Times that without a permanent criminal charge, the firm could continue to audit public companies. ("Audit Firm Survives Criminal Charge, $16 million later," New York Times, June 22, 2002.)

A spokesperson for BDO Seidman clarified that, "The investigation did not result in a single allegation against any current partners or employees of BDO Seidman... We believe BDO Seidman has the best litigation record of any national accounting firm."

-Rosemary Schlank

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.