Banco Espirito Santo v. BDO Seidman
In 2004, Banco Espirito Santo International Limited sued the accounting firm BDO Seidman claiming that the firm’s unprofessional conduct cost it over $170 million. The lawsuit stemmed from the work that BDO Seidman did for E.S. Bankest, a joint venture of Espirito Santo Bank and a Miami company called Bankest Capital run by Hector and Eduardo Orlansky. Bankest’s primary business was factoring—it bought receivables at a discount, collected the full amount, and kept the difference as its profit. In reality, Bankest did very little factoring, but was used as a shell company by the Orlanskys to funnel money away from Espirito Santo’s investor clients. BDO Seidman served both as the auditor for Bankest and as a strategic partner to one of its factoring clients—a clear conflict of interest. The lawsuit charged that because of its conflicted position, BDO Seidman chose not to perform comprehensive audits of Bankest; as such, the precarious financial situation was never uncovered, leaving Banco Espirito Santo with $170 million in losses when Bankest collapsed.
IMS | The Focal Point’s Role
The IMS | The Focal Point team helped Banco Espirito Santo’s legal team distill the many levels of complexity into a compelling story, and turn the ambiguities and nuances of a complex accounting fraud case into a black and white story that allowed them to easily assign the blame to the responsible parties. These themes were then brought to life in highly effective courtroom presentations. The Focal Point worked side-by-side with the trial team throughout the 4-month-long trial and damages phases to prepare for opening statement and closing arguments.
The jury deliberated three times, once after each phase of the trial and found in succession: (1) that BDO was grossly negligent, (2) that BDO should be held responsible for $170 million in compensatory damages, and (3) that BDO should pay over $351 million in punitive damages. The jury deliberated for under an hour in awarding both sets of damages.
Miami-Dade Circuit Court (Miami, FL)
IMS | The Focal Point’s Clients