SEC Suspends Former BDO Accountants

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SEC Suspends Former BDO Accountants

The Securities and Exchange Commission suspended three former BDO USA LLP accountants over alleged improprieties in an AmTrust audit. Photo: jonathan ernst/Reuters

Three former accountants for BDO USA LLP settled with Securities and Exchange Commission Friday and will be suspended from auditing public companies over alleged improprieties in an audit of insurer AmTrust Financial Services Inc.

The SEC said that BDO hadn’t completed its 2013 audit of AmTrust before the deadline to file the company’s annual report. Lev Nagdimov, the BDO senior manager on the AmTrust audit, instructed the audit team to sign off on their work and load blank or placeholder work papers into BDO’s electronic files, to give the appearance that the audit had been completed on schedule, the commission said. The auditors returned later to finish the work, the SEC said.

In addition, Richard J. Bertuglia, the BDO partner in charge of the audit, and John W. Green, a BDO partner who was responsible for scrutinizing the audit team’s performance, would have detected the improprieties if they had exercised “due professional care,” the SEC said.

Mr. Nagdimov agreed to be suspended from auditing public companies for at least five years, Mr. Bertuglia for at least three years and Mr. Green for at least one year. The three men didn’t admit or deny the SEC’s findings and can apply for reinstatement after their suspensions. Mr. Nagdimov was fired by BDO in 2014, and Mr. Bertuglia and Mr. Green have left the firm as well, the SEC said.

Attorneys for the three men couldn't immediately be reached for comment.

BDO said in a statement that it “takes these matters very seriously and has cooperated fully with the SEC on this matter.” The SEC didn’t allege any wrongdoing on BDO’s part.

The SEC allegations echo the claims of a BDO internal whistleblower, reported by The Wall Street Journal in April 2017, that BDO had loaded unfinished documents into an internal software system to cover the lack of completion of the AmTrust audit.

The SEC’s settlement with the formerBDO accountants is separate from and doesn’t affect the commission’s ongoing investigation of AmTrust’s accounting and other matters, which has been going on since 2013. AmTrust said in its most recent quarterly report that it was continuing to cooperate with the commission.

AmTrust restated three years of earnings in 2017 after it switched from BDO to another auditor, KPMG LLP. AmTrust has denied any wrongdoing and has said short sellers—investors who benefit from a stock’s decline—have spread false information about the company.

An AmTrust spokeswoman couldn't immediately be reached for comment Friday.

AmTrust’s controlling shareholders, the Karfunkel family and Chairman and Chief Executive Barry Zyskind, reached an agreement earlier this year to take the company private in a $2.95 billion deal, in collaboration with private-equity firm Stone Point Capital LLC. The company has said the deal is expected to close by the end of the year.

—Dave Michaels contributed to this article.

Write to Michael Rapoport at [email protected]