CORRECTING and REPLACING Sullivan & Cromwell Files Lawsuit on Behalf of Banco Espirito Santo International Against BDO Seidman, Alleging Fraud and Conflicts of Interest

Business Wire, May 18, 2004

Business Editors/Legal Writers

CORRECTION...by Sullivan & Cromwell

MIAMI--(BUSINESS WIRE)--May 18, 2004

In BW6091 issued May 18, 2004: Please replace the release with the following corrected version.

The corrected release reads:

SULLIVAN & CROMWELL FILES LAWSUIT ON BEHALF OF BANCO ESPIRITO SANTO INTERNATIONAL AGAINST BDO SEIDMAN, ALLEGING NEGLIGENCE AND CONFLICTS OF INTEREST

Sullivan & Cromwell today filed a lawsuit in the Circuit Court of the Eleventh Judicial Circuit (Miami), case number 04-11128, on behalf of Banco Espirito Santo International Ltd and certain affiliates against international accounting firm BDO Seidman, one of the five largest accounting firms in the world. The suit, which seeks in excess of $170 million in damages and comes amidst an ongoing investigation by the United States Attorney, charges that BDO Seidman did nothing more than "rubber stamp" year after year of phony financial statements.

The lawsuit says that BDO Seidman had conflicting interests and was negligent in auditing E.S. Bankest LC and its predecessor over an eight year period. BDO's "unqualified" audit opinions claimed to present "fairly, in all material respects, the financial position of" Bankest, when in fact Bankest's financial statements falsely showed over $200 million in assets when in reality there were almost none.

At the same time that BDO issued its opinions as Bankest's "independent" auditor, BDO was a strategic partner with Stratasys Group LLC, a Bankest affiliate that was used to carry out the fraud, according to the lawsuit. By the time a Federal Grand Jury indicted the managers of Bankest and Stratasys, lenders had been bilked of more than $170 million.

BDO cited as "shill"

The suit accuses BDO Seidman of "rubber stamping four years worth of obviously false financial statements."

"The principals (of this fraud) needed an independent auditor who would either not discover its manipulations of the accounts receivable or else look the other way when it falsified its financial statements. The principals found their shill in BDO," says the lawsuit.

The suit names both BDO International, headquartered in Brussels, and BDO Seidman, headquartered in Chicago.

BDO's Conflict

The lawsuit goes on to say that BDO's ignorance was financially motivated, and that it was a strategic ally with the affiliate company Stratasys, controlled by Dominick Parlapiano, one of the men which the U.S. government indicted and who recently pled guilty to various charges.

The lawsuit also says that Parlapiano had a "social relationship" with Sandy Lenner, the BDO audit partner in charge of the account, and that Parlapiano and other principals of the fraud had been long-term clients of BDO.

"It's as if the Enron-Arthur Andersen scandal has been forgotten," said Steven Thomas, of Sullivan & Cromwell. He is co-counsel along with Mitchell Berger of the Florida law firm Berger Singerman.

Thomas did not rule out the possibility of additional claims being brought in this matter.

(Note to Editors: The Complaint is posted on the Berger Singerman Website at http://www.bergersingerman.com)