BDO Seidman’s international arm could be brought back into a lawsuit in which the accounting firm was found negligent for failing to detect a Portuguese bank’s massive fraud and ordered to pay $521 million.

At issue is the relationship between BDO Seidman and BDO International and whether the latter could be held liable for the U.S. firm’s failure to identify problems in Banco Espirito Santo’s financial statements between 1998 and 2002.

On Wednesday, the Third District Court of Appeal in Florida ruled that a jury should have decided whether BDO International should have also been considered liable. Instead, a lower-court judge had made that decision and dismissed the international organization from the case last February.

The appeals court was opining on part of a four-year-old lawsuit that culminated in a Florida jury’s decision last summer to hold BDO Seidman responsible for what they determined where negligent audits. The six jurors decided that BDO Seidman should pay the bank $170 million in compensatory damages and $351 in punitive damages. BDO’s appeal of the jury’s findings is ongoing and could take a couple of years to be decided, according to BDO spokesman Jerry Walsh.

In a debate over how much influence the international firm had over the U.S. firm, the lower court decided that Banco Espirito Santo — which sued both of them in 2004 — had not shown that there was an “actual agency relationship” between the two firms.

However, the appeals court’s opinion notes that BDO Seidman used BDO International’s literature, responded to its requests, and complied with its audit manuals. The international firm also had the right to review the U.S. firm’s management at any time. “BDO International did control the means — the management, audit manuals, and software — used by BDO Seidman to conduct its work for the Banco plaintiffs,” the court wrote.

Formed more than three decades ago, BDO International has 626 member-firm offices in 110 countries, according to BDO’s website. Run by a staff of fewer than 10 people working in Brussels, the organization acts as a coordinating office for all the “independent” firms, Walsh told CFO.com.

Adds BDO International’s attorney, Mark Raymond of Broad and Cassel, “One article has called them a parent company. They’re not. They are simply a coordinating network to facilitate communications between numerous members.”

BDO International was dropped from the case in February 2007, shortly before a judge declared a mistrial. According to a Miami Herald story at the time, the judge’s decision stemmed from a plaintiff’s attorney’s reference in court to the suicide of a BDO executive in 2003 not long after the bank’s fraud was uncovered.

The international arm did not participate in the second trial and would expect to undergo a new trial — if the case goes that far following Wednesday’s decision, Raymond says. He’s hoping the other outstanding appeals in BDO Seidman’s case will be decided before that point.

As for the BDO’s former client, the bank’s attorney, Steven Thomas of Thomas, Alexander and Forrester, says he considers the appeals court’s decision “a victory” that could lead to BDO International being held equally liable for the $521 million.

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