BDO Pays $40 Million for Stanford Ponzi

DALLAS (CN) – Accounting giant BDO USA will pay $40 million to settle claims it knowingly participated in R. Allen Stanford’s $7 billion Ponzi scheme.
     Settlement terms were not disclosed in the May 15 federal court filing, in which BDO denied wrongdoing. The company said it agreed to pay the money to save “time and energy.”
     The Official Stanford Investors Committee sued the company in 2012 , claiming it repeatedly issued unqualified audit opinions for Stanford’s annual financial statements that were critical to Stanford’s apparent success.
     Stanford was convicted in 2012 in Houston of selling phony certificates of deposit. He is serving 110 years in federal prison.
     “BDO Seidman was never the auditor of Stanford International Bank (Ltd.), the entity where Robert Allen Stanford committed his fraud,” the company said in a statement Thursday. “BDO audited an affiliated company whose financial statements are not alleged by plaintiffs to have contained any material misstatements. However, after almost four years of litigation and the likelihood of more to come, this settlement makes the most sense for our partnership given our relevant insurance coverage and the costs, as well as the loss of time and energy, associated with continuing this case.”
     Plaintiffs’ attorney Edward Valdespino, with Strasburger & Price in San Antonio, said the previous largest award for Stanford Ponzi victims was $5 million.
     “It’s really the first significant settlement for the victims after six years,” he told the San Antonio Express-News. “In the scheme of things, it’s a small amount for each individual investor, but this is one of many lawsuits out there.”
     The plaintiffs claimed BDO USA played a significant role in weakening banking laws in Antigua, where Stanford based his Ponzi scheme.
     When Antigua came under increased scrutiny from foreign regulators, Stanford formed a task force to rewrite the country’s banking laws. The task force succeeded in weakening regulations, and in effectively eliminating the Stanford bank’s Antiguan competitors, making Stanford the country’s de facto offshore banking regulator.
     “The smashing success of the Stanford task force and its misleading regulatory ‘reforms’ were rooted in its exclusive nine-person membership,” the complaint stated. “Every firm represented on the Task Force provided crucial services to Stanford Financial Group, and every individual member of the Task Force was personally appointed by Stanford himself. … BDO USA’s partners and associates comprised nearly half of the Stanford Task Force’s members, more than any other firm represented on the Task Force.”
     The key aim of the task force was to amend Antigua’s Money Laundering Act to ensure that “fraud” and “false accounting” were not included as violations, investors said.
     BDO USA allegedly had some of the most important responsibilities for this, reviewing and advising on Antigua’s banking laws, and making recommendations to Antigua’s regulatory authorities, including procedures for supervising and examining international banks.
     The settlement comes three days after New Orleans-based law firm Adams & Reese and Baton Rouge-based Breazeale Sachse & Wilson, among others, agreed to pay Stanford’s court-appointed receiver $5 million to settle claims they referred clients to the scheme and gave fake opinions to Antiguan banking authorities.

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