May 5 (Bloomberg) -- BDO USA, the accounting firm formerly known as BDO Seidman LLP, agreed to settle a lawsuit that accused it of failing to detect a fraud in a joint venture of former client Banco Espirito Santo SA.
BDO won reversal of a $521.7 million jury verdict in the case last year when a Florida appeals court ordered a new trial. The terms of the settlement are confidential, Jerry Walsh, a BDO spokesman, said.
“BDO USA LLP has entered into confidential settlement agreements with Banco Espirito Santo and Barry Mukamal, the bankruptcy trustee of E.S. Bankest LC, pursuant to which the lawsuits against BDO have been resolved,” Walsh said in an e-mailed statement.
Banco Espirito Santo, based in Lisbon, sued in 2004 claiming it suffered losses when New York-based BDO certified as real accounts receivable at E.S. Bankest that were fake.
In 1998, the bank formed E.S. Bankest, which bought receivables and collected the debt, as a joint venture with Bankest Capital. E.S. Bankest officials faked millions of dollars in receivables, and four executives were later convicted of crimes. Banco Espirito Santo sold its interest in 2002 for $10 million.
Florida’s Third District Court of Appeal in Miami ruled in June that a 2007 jury award in the case should be reversed because a decision to split a trial in three parts possibly prejudiced jurors.
U.S. Bankruptcy Judge A. Jay Cristol in Miami, who is overseeing E.S. Bankest’s bankruptcy case, ordered the settlement papers sealed and will hold a private hearing in chambers about the accord on May 19.
The case is Banco Espirito Santo International Ltd. v. BDO Seidman LLP, 04-14009-CA-01, 11th Judicial Circuit of Florida (Miami-Dade County).
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