BDO Seidman, LLP
Encyclopedia
BDO USA, LLP is the United States Member Firm of BDO International
, the largest global accounting and consulting network outside of the Big Four
.
in 1910 by Maximillian L. Seidman. At that time the accounting profession was in its infancy, with fewer than 2,200 practicing CPAs in the United States. Shortly thereafter in 1913, the 16th Amendment to the United States Constitution allowed income tax
to be levied on individual Americans for the first time. M. L. Seidman saw the potential of the accountant's role to provide tax services to individuals. By 1917, Congress enacted the first revenue bills and the U.S. entry into World War I
created the need for corporate income and excess profit taxes. At the same time, federal spending rose to $18.9 billion with 58 percent of the federal revenues provided from income taxes. M.L. Seidman and his siblings, who joined him in his new accounting firm, seized the opportunity to provide tax services to businesses in addition to individuals.
In 1925, the firm rapidly expanded, opening offices in Jamestown, Illinois
and Rockford, Illinois
, followed by Chicago
in 1921, and Gardner, Massachusetts
in 1924. In 1922, J. S. Seidman joined the firm as a founding member.
The 1930s brought another new beginning for the accounting profession. In 1933, Congress passed the Securities Act, requiring public corporations to have financial statements included in registration statements and periodic reports reported on by independent CPAs. A year later, the Securities and Exchange Commission was created to administer the new legislation.
In 1950, L. William Seidman
joined the firm and ultimately became its managing partner before leaving for government service, most notably as Chair of the FDIC.
was created and has grown to become the fifth largest accounting and consulting network in the world with 626 Member Firm offices in over 110 countries.
In February 2009, BDO USA, LLP launched the firm’s first-ever national advertising campaign: "PEOPLE WHO KNOW, KNOW BDO”. This sustained three-year program, which encompasses television, print and digital media, will position BDO USA as the firm of choice, emphasizing the technical knowledge, global reach, partner involvement and responsiveness the firm brings to its client relationships.
lawyer, Steven Thomas, said." In August 2007 a jury in Miami awarded Espirito Santo $521.7 million--$170 million in compensatory damages and nearly $352 million in punitive damages--over allegedly negligent audits that BDO conducted on a corrupt Espirito Santo subsidiary…But in a 20-page ruling, a three-judge appellate panel unanimously concluded that the 2007 trial was wrongly bifurcated into separate sections and that jurors were forced to determine BDO's liability too early in the case. The Florida appeals court's ruling seriously undermined Espirito Santo's claim that BDO should reimburse the bank for $140 million in debenture notes that it had sold its clients while making another $30 million in loans to a subsidiary as part of a shareholder agreement. One of those noteholders testified for Espirito Santo at trial that they relied on BDO's audit opinions, which the trial judge deemed sufficient to sustain the claims of other investors. But the appeals court found fault with that reasoning, ruling that Espirito Santo would have to call every noteholder if it wanted to argue that each one relied on BDO's audits before buying notes sold by Espirito Santo."
refund checks were fraudulent. The average legitimate check was less than $10,000 while the average scam check was over $300,000. "The scandal may also singe BDO Seidman, a private audit firm that gave [Washington DC CFO Natwar] Gandhi its seal of approval earlier this year. Its auditors were paid millions to go over the city’s books and gave Gandhi’s office an unqualified opinion." In 2010, a mentally ill woman, who was not a DC employee was able to exploit a security loophole in DC's financial systems to file tax returns claiming $19.1 million in refunds.
scandal, the New York Law School
filed a lawsuit against J. Ezra Merkin
, Ascot Partners, and its auditor BDO Seidman, after losing its $3 million investment in Ascot. The lawsuit charged Merkin with recklessness, gross negligence and breach of fiduciary duties.
BDO International
BDO International is a worldwide professional services network of public accountancy firms, serving national and international clients. Each BDO Member Firm is an independent legal entity in its own country. The network, originally formed in 1963 as Binder Seidman International Group, is...
, the largest global accounting and consulting network outside of the Big Four
Big Four auditors
The Big Four are the four largest international professional services networks in accountancy and professional services, which handle the vast majority of audits for publicly traded companies as well as many private companies, creating an oligopoly in auditing large companies...
.
History
BDO USA, LLP was founded as Seidman and Seidman in New York CityNew York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
in 1910 by Maximillian L. Seidman. At that time the accounting profession was in its infancy, with fewer than 2,200 practicing CPAs in the United States. Shortly thereafter in 1913, the 16th Amendment to the United States Constitution allowed income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
to be levied on individual Americans for the first time. M. L. Seidman saw the potential of the accountant's role to provide tax services to individuals. By 1917, Congress enacted the first revenue bills and the U.S. entry into World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
created the need for corporate income and excess profit taxes. At the same time, federal spending rose to $18.9 billion with 58 percent of the federal revenues provided from income taxes. M.L. Seidman and his siblings, who joined him in his new accounting firm, seized the opportunity to provide tax services to businesses in addition to individuals.
Expansion
An era of expansion began. Fostered by the federal government's conversion of furniture and woodworking companies to aircraft production for the war effort, the firm opened an office in Grand Rapids, Michigan in 1917. Seidman and Seidman quickly established itself as a leader in serving the furniture industry by developing the first effective furniture plant costing system. Today, BDO Seidman's Furniture Industry practice remains in the industry.In 1925, the firm rapidly expanded, opening offices in Jamestown, Illinois
Jamestown, Illinois
Jamestown, Illinois is an unincorporated community located in Clinton County, Illinois. United States.-History:The first settlement near Jamestown was made in 1817 by John King and his brother-in-law. In the 1840s and 1850s many German farmers settled in the area...
and Rockford, Illinois
Rockford, Illinois
Rockford is a mid-sized city located on both banks of the Rock River in far northern Illinois. Often referred to as "The Forest City", Rockford is the county seat of Winnebago County, Illinois, USA. As reported in the 2010 U.S. census, the city was home to 152,871 people, the third most populated...
, followed by Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
in 1921, and Gardner, Massachusetts
Gardner, Massachusetts
Gardner, Massachusetts is a city in Worcester County, Massachusetts, United States. The population was 20,228 as of the 2010 census. Gardner is home to Dunn State Park, Gardner Heritage State Park, Lake Wampanoag Wildlife Sanctuary, and Mount Wachusett Community College.-History:Named in honor of...
in 1924. In 1922, J. S. Seidman joined the firm as a founding member.
The 1930s brought another new beginning for the accounting profession. In 1933, Congress passed the Securities Act, requiring public corporations to have financial statements included in registration statements and periodic reports reported on by independent CPAs. A year later, the Securities and Exchange Commission was created to administer the new legislation.
In 1950, L. William Seidman
L. William Seidman
Lewis William "Bill" Seidman was an American economist, financial commentator, and former head of the U.S. Federal Deposit Insurance Corporation, best known for his role in helping work to correct the Savings and Loan Crisis in the American financial sector from 1988-1991 as head of the related...
joined the firm and ultimately became its managing partner before leaving for government service, most notably as Chair of the FDIC.
Development of the national firm
The firm continued to grow and by the 1960s, truly became a national firm. On April 1, 1968 the firm was converted into a national general partnership. This marked the beginning of a new era of expansion. Over the years to the present, the firm established many offices throughout the United States. Founding Partner Keith Beresheim was instrumental in helping BDO grow its practice and become a national tier firm.Present
Today, BDO USA, LLP has 37 offices and more than 400 independent Alliance firm locations nationwide. During this timeframe, BDO InternationalBDO International
BDO International is a worldwide professional services network of public accountancy firms, serving national and international clients. Each BDO Member Firm is an independent legal entity in its own country. The network, originally formed in 1963 as Binder Seidman International Group, is...
was created and has grown to become the fifth largest accounting and consulting network in the world with 626 Member Firm offices in over 110 countries.
In February 2009, BDO USA, LLP launched the firm’s first-ever national advertising campaign: "PEOPLE WHO KNOW, KNOW BDO”. This sustained three-year program, which encompasses television, print and digital media, will position BDO USA as the firm of choice, emphasizing the technical knowledge, global reach, partner involvement and responsiveness the firm brings to its client relationships.
Controversies
BDO has been involved in a number of engagements which resulted in major litigation and press attention.Miami Bank Fraud (2007-2010)
A Miami subsidiary of a Portuguese bank Espirito Santo relied on audits from BDO Seidman, which certified audits for E. S. Bankest accounts totaling some $225 million, of which only $5 million represented legitimate income, a Banco Espírito SantoBanco Espírito Santo
Banco Espírito Santo is a private Portuguese bank, based in Lisbon.The Banco Espírito Santo’s origins began with the lottery, currency exchange and securities business carried out by José Maria do Espírito Santo e Silva between 1869 and 1884...
lawyer, Steven Thomas, said." In August 2007 a jury in Miami awarded Espirito Santo $521.7 million--$170 million in compensatory damages and nearly $352 million in punitive damages--over allegedly negligent audits that BDO conducted on a corrupt Espirito Santo subsidiary…But in a 20-page ruling, a three-judge appellate panel unanimously concluded that the 2007 trial was wrongly bifurcated into separate sections and that jurors were forced to determine BDO's liability too early in the case. The Florida appeals court's ruling seriously undermined Espirito Santo's claim that BDO should reimburse the bank for $140 million in debenture notes that it had sold its clients while making another $30 million in loans to a subsidiary as part of a shareholder agreement. One of those noteholders testified for Espirito Santo at trial that they relied on BDO's audit opinions, which the trial judge deemed sufficient to sustain the claims of other investors. But the appeals court found fault with that reasoning, ruling that Espirito Santo would have to call every noteholder if it wanted to argue that each one relied on BDO's audits before buying notes sold by Espirito Santo."
Washington, D.C. tax scandal (November 2007-2010)
A group of DC government employees had embezzled funds by fradulently issuing real estate tax refund checks to their friends. BDO Seidman was the independnet auditor of the DC government's financial records. On November 21, 2007 Reuters wrote “Washington, D.C., officials should fix problems identified in an audit that found the city mishandled millions of dollars, according to Delegate Eleanor Holmes Norton, who represents the U.S. capital in Congress…. The audit, conducted by accounting firm BDO Seidman, LLP, found that financial reporting for the city's school system and Medicaid programs did not match their financial statements, making both areas vulnerable to fraud….Altogether, auditors found more than 160 instances where the city failed to comply with conditions for spending federal money, primarily by misreporting funds and mismanaging cash." As of November 2007, it was estimated that over $30 million were scammed by Washington, DC tax officials since 1999. At the height of the scam, half of the property taxProperty tax
A property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...
refund checks were fraudulent. The average legitimate check was less than $10,000 while the average scam check was over $300,000. "The scandal may also singe BDO Seidman, a private audit firm that gave [Washington DC CFO Natwar] Gandhi its seal of approval earlier this year. Its auditors were paid millions to go over the city’s books and gave Gandhi’s office an unqualified opinion." In 2010, a mentally ill woman, who was not a DC employee was able to exploit a security loophole in DC's financial systems to file tax returns claiming $19.1 million in refunds.
Monster.com option backdating scandal (1997–2005)
On December 13, 2006, Monster.com filed a $339.6 million restatement of its financial results from 1997–2005 related to intentional fraud in the company's stock option practices. BDO Seidman served as the independent auditor of Monster.com, but it has not been named as a party in either civil or criminal litigation. BDO auditors were provided falsified documents with incorrect option grant dates by Monster employees, but the lack of a complete set of records regarding the company's option grants could, and quite possibly should, have been discovered and identified as a major red flag at some point during the six-year period in which the backdating took place. As a result of the undiscovered fraud, in 1999 and 2000 Monster reported a profit when, in fact, the company lost nearly $40 million.New York Law School and Madoff scandal (December 2008)
On December 16, 2008, in connection with the Bernard MadoffBernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
scandal, the New York Law School
New York Law School
New York Law School is a private law school in the TriBeCa neighborhood of Lower Manhattan in New York City. New York Law School is one of the oldest independent law schools in the United States. The school is located within four blocks of all major courts in Manhattan. In 2011, New York Law School...
filed a lawsuit against J. Ezra Merkin
J. Ezra Merkin
Jacob Ezra Merkin is a former money manager and financier. He was a close business associate of Bernard Madoff, and is alleged to have played a significant part in the Madoff fraud. He served as the Non-executive Chairman of GMAC until his resignation on January 9, 2009, at the insistence of the...
, Ascot Partners, and its auditor BDO Seidman, after losing its $3 million investment in Ascot. The lawsuit charged Merkin with recklessness, gross negligence and breach of fiduciary duties.