The Wall Street Journal reported yesterday that BDO is at the center of a messy situation with one of its clients, thanks to a super slick auditor on the inside cruising the firm’s halls:
The auditor at BDO USA LLP casually wandered around the accounting firm’s New York offices, striking up conversations with colleagues about BDO’s audit of the large insurer AmTrust Financial Services Inc.
Unknown to the colleagues, the auditor was carrying a tiny recording device disguised as an ordinary Starbucks gift card, capturing every word for the Federal Bureau of Investigation.
So wait just one gosh darn minute here. (S)he might as well have roamed from cube-to-cube wearing Buddy Holly glasses with a camera taped across the bridge and a bulky voice recording pen in his or her front pocket. This is some serious back page of the comic book spy stuff here you guys.
Presumably, the BDO auditor — who had been assigned to AmTrust for three years before ratting the firm out to the government — realized something wasn’t right with that particular client, and recruited none other than Harry Markopolos for help uncovering the problem. Markopolos of course was the Chicken Little of the financial crisis, first gaining notoriety for pestering the SEC about Bernie Madoff’s blatantly Ponzi-like activities before the rest of the world knew about them.
Markopolos and his posse of whistleblowing vigilantes are banking on a payout under the SEC’s Whistleblower Program should legal action against AmTrust be initiated and result in a successful handing of their asses to them. Whistleblower awards range from 10 percent to 30 percent of money collected over $1 million in successfully prosecuted SEC cases. The Markopolos group acting on internal documents provided to them by the BDO auditor say “$277 million in losses had been shifted to an offshore affiliate from 2009 to 2012” according to WSJ, accounting for 38% of net income in 2012.
Meanwhile, an AmTrust spokesperson would not provide comment on any SEC probes that may or may not be going down, though she did make it clear that she thinks the amateur spy at BDO is a loser. All of this heat is nothing but “fantasies concocted and intentionally publicized by parties who clearly have a self-serving agenda and appear to be trying to profit from misinformation about AmTrust,” she said.
In response to the WSJ piece, AmTrust issued a statement that reads in part, “AmTrust has no direct knowledge of any of the individuals, named or unnamed, referenced in the article and is certainly not aware that they have any credibility with respect to their understanding of AmTrust or its regulators.”
Many of the questions from the Wall Street Journal related to the disproved short seller themes about AmTrust that have been used unsuccessfully by shorts and their confederates for the past several years. There is nothing in today’s Wall Street Journal article in terms of the company’s operations or financial results that is different from these old, recycled short seller themes.
In light of its observance of the Passover holiday over the next two days, AmTrust will have no further comment at this time.