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The chief executive of BDO USA has promised to fight “falsehoods and innuendos” surrounding its audit of the bankrupt auto parts manufacturer First Brands.
In a statement sent to BDO staff on Tuesday and posted on its website, Wayne Berson said the audit firm expected potentially years of scrutiny over its work for First Brands and was taking “decisive action to protect our reputation”, including threatening legal proceedings against an accounting industry blog.
BDO gave First Brands’ financial statements a clean bill of health just months before it collapsed into bankruptcy with $12bn of debt, much of which was not clearly shown on the company’s balance sheet.
“No one has accused the firm of doing anything wrong in connection with our role as auditors,” Berson wrote, saying the issue had been raised by staff with him and other BDO executives.
“Every firm in our industry has had clients that pursue bankruptcy filings to reorganise in the same way that First Brands is seeking to reorganise.”
BDO last week notified Texas bankruptcy court of the names of three lawyers who would represent the firm in the First Brands bankruptcy case.
Several news outlets and commenters on social media had noted BDO was sold two years ago to an employee trust financed with $1.3bn of debt from the private capital group Apollo, and that Apollo had separately taken a short position in First Brands’ debt.
“Regrettably, the reporting so far that mentions BDO has resorted to the use of falsehoods and innuendos,” Berson’s memo said.
“The reporting that occurred last week attempting to link our audit relationship with First Brands to our relationship with Apollo was false. The two firms had no such connectivity,” Berson told staff. “We are taking decisive action to protect our reputation against these claims.”
One news outlet, the industry blog Going Concern, had already been contacted by BDO’s lawyers accusing it of defamation and demanding a retraction, Berson said, linking to the legal letter. Going Concern declined to comment.
“We anticipate that the First Brands bankruptcy will linger for months, if not a year or two, and therefore potentially will continue to result in inaccurate reporting relating to BDO,” Berson wrote. “Your leadership team will continue to push back where that reporting is inaccurate and continue to be transparent with you as developments occur.”
Berson also disputed the idea that a heavy debt load or the collapse of First Brands was the reason BDO has been cutting staff in its audit and tax businesses this year, as reported by Going Concern and others.
“Our firm continues to focus on operational efficiency in the normal course of business in the same way it always has, and in the same way as industry peers do,” he said.
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