MANHATTAN (CN) – BDO Global Coordination failed to exercise quality control over a member accounting firm that rubberstamped Axium International’s “sham” financial statements, the Chapter 7 trustee for Axium claims in Federal Court. Axium was formerly one of the entertainment industry’s top payroll companies.
“BDO Global’s failure to keep its promise and exercise its right and obligation to ‘strictly control’ the quality of BDO Seidman’s audits cost Axium its existence,” trustee Howard Ehrenberg claims.
Axium was an international payroll company that once boasted $1.8 billion annual profits and had clients like Sony and 20th Century Fox Television.
“Year after year, BDO Seidman certified that Axium’s financial statements ‘present[ed] fairly, in all material respects, the financial condition’ of Axium,” the lawsuit states. “BDO Seidman’s certifications were false – Axium’s financial statements were a sham.”
The trustee adds: “Axium systematically and grossly underpaid the payroll taxes of its clients. Between 2004 and 2007 alone, Axium underpaid federal payroll taxes by $100 million according to the Internal Revenue Service. BDO Seidman thus certified Axium as a substantially profitable company when it was in fact an insolvent company. As BDO Seidman now admits, the revenue and liabilities BDO Seidman audited were materially false.”
The plaintiff demands an injunction to prevent BDO Global from engaging in false and deceptive business practices, plus actual and punitive damages. Ehrenberg is represented by Emily Alexander with Thomas Alexander & Forrester LLP of Venice, Calif.