BDO International remains confident it will not be drawn into a
multi-million dollar law case involving its US member firm BDO
Seidman despite a US appeals court decision that a jury must decide
on the nature of the relationship between the two entities.

In 2007, a US jury found BDO Seidman was grossly negligent in
failing to detect a fraud that led to the bankruptcy of Miami
financial services provider Bankest and ordered the firm to pay
$521 million in damages.

The plaintiff, Bankest’s parent company Banco Espirito Santo, also
pursed BDO International, claiming the two entities shared an
‘actual common law agency relationship’. However, the judge at the
trial ruled that the plaintiff failed to prove that BDO
International was involved.

The plaintiff appealed the verdict and on 12 March 2008, a Florida
appeals court ruled that the question as to whether BDO
International could be implicated in the case should have gone
before a jury.

BDO International chief executive Frans Samyn told IAB that the
entire case will need to be tried again before a jury. He added
that he was unaware when this will occur.

To establish the entities shared an agency relationship, the
plaintiff must prove: there was an acknowledgement by the principal
that the agent will act for them; the agent accepted the
undertaking; and there was control by the principal over the
actions of the agent.

“We will contest everything,” Samyn said of the claims. “BDO
Seidman is the BDO member firm in the United States, and there is
nothing in the rules of BDO International that constitutes or
implies a partnership between BDO International and the member

MSI Global Alliance chief executive James Mendelssohn said the
appeal court’s ruling has “put back into the spotlight this whole
question of liability between networks and associations”.
Mendelssohn said that although the distinction between a network
and an association does not mean members of a network are liable
for negligence of other members while members of associations are
not liable, the case will make smaller firms in networks consider
their options.