BDO Auditors Face Lawsuit Over Bluthorn Audits

Liquidator urges creditors of BFM to institute proceedings against BDO Says problems of locus standi may prevent him from acting against BDO himself Auditing firm BDO faces a lawsuit for its alleged negligence in its audits of liquidated Bluthorn Fund Managers (BFM), now liquidated, that collapsed in a suspected P250 million fraud. In a report before the High Court, BFM liquidator Kopanang Thekiso proposes that “the creditors institute a delictual action against BDO Botswana for professional gross negligence for failing to ensure that the audited financial statements for BFM were presented to the standard required in terms of the Companies Act, Financial Reporting Act and the International Financial Reporting Standard”. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] The report urges legal action against BDO auditors for failing to “identify that the CIU (Collective Investment Undertakings) Act was the applicable or relevant legislation for audit purposes despite the fact that BFM was registered and licensed as a collective investment undertaking with the NBFIRA”. According to the report, BDO also failed to identify red flagging that BFM contravened Section 57 of the CIU Act, in that BFM was not permitted to grant loans or act as a guarantor on behalf of third parties. BDO is also accused of failing to identify that “none of the invested funds of BFM were held or entrusted to a custodian as required in terms Section 32 of the CIU Act” and “apply impairment considerations to the loan balances of BH and PEB as required in terms of the International Financial Reporting Standards”. Says the liquidator of BFM in the reports: “I am of the view that we possess enough information to ascertain that BDO acted grossly and were negligent in the performance of its duties…”. He avers: “They could be very much culpable in the losses suffered by the creditors of the estate.” Thekiso speaks of difficulties of locus standi in instituting action against BDO himself. “The first difficulty with instituting an action against BDO is that I, as the liquidator of the companies in question in the Group, may not have the required locus standi to institute proceedings against BDO on the basis that although I act in the best interests of the creditors in the Group, I do not represent the creditors in the Group as I only represent the liquidated companies in the Group.” Therefore, he says, “the persons to whom the claim against BDO belongs to (are) the creditors and not me as the liquidator. It is the creditors who must institute proceedings against BDO. “On that basis, it cannot follow that the costs of the estate of the liquidated companies in the Group can be used in such an action unless an agreement can be reached between the creditors and myself on a way to fund the action against BDO, as it will be a costly exercise and a senior counsel will need to be involved in the matter.” The liquidator of BFM emphasises that either himself or the creditors must demonstrate that had it not been for the grossly negligent conduct of BDO, the creditors would have not suffered loss. Thekiso says said he will need further guidance from the creditors regarding the viability of instituting a claim against BDO and to “discuss how the claim against BDO may be funded or how all parties can contribute to the costs of instituting an action against BDO. [/ihc-hide-content]

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BDO Auditors Face Lawsuit Over Bluthorn Audits

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