Mistrial Granted in BDO Fraud Case

Attorneys for Portugal-based Banco Espirito Santo will start from scratch with their $170 million lawsuit against the accounting firm.
Dave CookMarch 5, 2007

A judge has declared a mistrial in the $170 million fraud case brought by Portugal-based Banco Espirito Santo against BDO Seidman, according to published accounts.

According to the Miami Herald, defense attorneys had moved for a mistrial after a plaintiff’s attorney, while questioning a witness, referred to the suicide of a BDO executive in 2003. The death reportedly took place shortly after a $220 million fraud was discovered at a BDO audit client, financial-services firm E.S. Bankest.

Banco Espirito Santo filed suit against BDO in 2004, accusing it of unprofessional conduct and failing to uncover the Bankest fraud, which allegedly cost the bank $170 million, the newspaper noted. Bankest is no longer in business.

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BDO had reportedly asserted that Bankest managers appointed by the bank were responsible for the fraud and concealed it.

The Herald stressed that there has been no suggestion that the executive’s death was connected to the fraud. And indeed, before testimony began, Miami-Dade Circuit Judge Jose Rodriguez ruled that to avoid unduly prejudicing the jury, the suicide must not be mentioned in its presence.

In a statement following the judge’s ruling, BDO Seidman praised the judge, citing the “highly prejudicial and inflammatory remarks by plaintiffs’ counsel.” Added the statement, “These remarks were merely the latest example of plaintiffs’ counsel attempting to distract the jury from the facts of the case, including the bank’s wrongdoing, through improper insinuations that had no basis in this trial.

Steven Thomas of Sullivan and Cromwell, an attorney for Banco Espirito Santo, told the Associated Press that his co-counsel’s mention of the suicide was unintentional. “We’re disappointed but respectful of the judge’s ruling,” he reportedly added.

“We believe that BDO Seidman should be held responsible for its actions,” Thomas told Reuters. “The jury is going to determine whether they were liable or not.”

A meeting to schedule a new trial, with a new panel of jurors, is planned for Wednesday.