Orloff Lowenbach Stifelman & Siegel P.A.

News & Publications

OLSS Obtains Judgment by Settlement for its Clients Against Major Accounting Firm

Three New Jersey investment funds, represented by Laurence B. Orloff and David Gorvitz of Orloff, Lowenbach, Stifelman & Siegel, P.A., obtained on May 20, 2015, a judgment in the amount of $2,255,000 against part of the world's fifth largest accounting and consulting conglomerate, BDO USA (f/k/a BDO Seidman), in a case involving claims that BDO had malpracticed by repeatedly issuing “clean” annual audits of a Madoff “feeder fund.”  The judgment was entered pursuant to New Jersey’s Offer of Judgment Rule, a recognized settlement device.

This is believed to be the first judgment against a major accounting firm in connection with a claim related to the Madoff fraud and the largest recovery by individual feeder fund investors against an auditor.  The plaintiffs were funds advised by Sandalwood Securities, Inc., of Roseland, New Jersey, that invested in a hedge fund called Ascot Partners, L.P., managed by one J. Ezra Merkin.  All or virtually all of Ascot's assets were placed with Madoff, and BDO annually transmitted audited financial statements of Ascot that showed the existence of substantial income and billions of dollars of assets which, in fact, did not exist, and which the plaintiffs alleged they had relied upon in placing funds with Ascot Partners, L.P., and declining to withdraw funds already placed.

Prior to the judgment, the plaintiff funds had received, in connection with the lawsuit, the additional sum of $1,000,000 pursuant to a settlement with  third-party defendants who had been joined by BDO.