Archives for June 2010

Top 100 Firm Being Acquired By McGladrey

According to the Boston Business Journal, Minneapolis-based McGladrey (FY09 net revenue of $1.5 billion), will acquire IPA Top 100 firm, Boston-based Caturano and Company (FY09 net revenue of $67.1 million).

McGladrey signed a letter of intent to acquire Caturano and the deal is subject to board approval by the McGladrey’s parent company, H&R Block Inc. Acquisition talks began in late 2009. 

If approved, the acquisition will put more pressure on industry heavyweights in the Boston marketplace. The Boston-based firm’s turf has been the target of stepped up competition from the Big Four firms, which have courted smaller clients aggressively. If the deal is sealed, McGladrey will have a combined Boston operation of 500 employees and 216 professional staff.

Richard Caturano, Caturano’s CEO estimates the Boston office will generate $100 million in revenue in 2010. Caturano, who will be the MP of the Boston office, says the deal makes sense because he’ll have a national brand for clients who previously passed over Caturano because of its position as a regional firm. “Firms won’t default to the competition because they want a national brand name,” Caturano said. “We have that now.” 

RSM McGladrey Inc. and McGladrey & Pullen LLP announced recently that the two firms will use “McGladrey” as their new brand and logo. The move means the two firms now will market themselves as a single entity, though they will continue to maintain separate incorporations.

Former IPA Top 100 MP Suing Partner Group

The co-founder of Sparks, Md.-based SC&H Group (FY09 net revenue of $47.8 million) is suing the remaining owners of the firm, contending that he was fired so they could take over his ownership shares at a low price, the Baltimore Sun reported.

Co-founding partner, Thomas Stout is seeking $15 million in damages, plus $45 million in punitive damages from each of the owners. He also wants a receiver to oversee the dissolution and liquidation of the 280-employee firm, according to the suit he filed Friday in Baltimore County Circuit Court. The firm, also named as a defendant in the suit, has offices in Sparks, Atlanta and McLean, Va.

Stout helped found the firm in 1991 and had been MP until he was fired on May 28. The other owners, Ronald Causey, Gregory Horning and Michael Young, wrote in a termination letter that Stout was failing to report to work and displayed “an unacceptable and disruptive leadership style.”

The suit alleges that the owners were trying to gain control of Stout’s stake of ownership when stock prices were low. The price of a share in the firm’s employee stock ownership plan had fallen to $45.80 at the end of 2009 after the recession hit. The value was $57.39 at the end of 2008.

Under the terms of a signed agreement, Stout would have to sell his shares the following year at a price determined by the year-end value minus a 25% discount if he were dismissed for cause, the newspaper reported.

“This plan was conceived, orchestrated and implemented for the purpose of enriching the individual defendants to the detriment, and at the expense, of Stout,” the suit alleges.

Katie Lochte, a spokeswoman for SC&H Group, told the Sun: “The allegations are completely unwarranted, and we’ll defend them in court.”

Moss Adams Expands Footprint With Grant Thornton Office Acquisition

Seattle-based Moss Adams (FY09 net revenue of $322 million) announced their plan to acquire the Albuquerque, N.M. practice of Grant Thornton (FY09 net revenue of $1.1 billion) in July.

Kim Nunley, Grant Thornton’s Albuquerque OMP, will join Moss Adams as a partner along with many of the client service staff and employees. Wayne Brown, Moss Adams Albuquerque OMP, will continue to provide local leadership. He says, “I have known and respected Kim for many years and look forward to working closely with her. She is highly regarded within the profession and the Albuquerque community.” 

In evaluating its strategic direction, GT senior leadership determined it will exit the New Mexico market. 

This acquisition demonstrates Moss Adams commitment to the Southwest and overall firm growth. According to Chris Schmidt, Moss Adams president, “Moss Adams is focused on growth and the GT practice blends well with our Albuquerque industry group specialization in areas such as financial institutions, credit unions, employee benefit plans, technology/life sciences, and manufacturing companies.”

Moss Adams has 1,700 employees and 230 partners; the firm serves its clients from 21 offices in Washington, Oregon, California, Arizona, and New Mexico.

BDO Off The Hook: Appeals Court Throws Out $521 Million Verdict

A Florida appellate court overturned a $521 million jury verdict against Chicago-based BDO Seidman LLP (FY09 $620 million) in a case where the Portuguese financial firm Banco Espirito Santo accused BDO of failing to unearth a fraud that led to the collapse of a Florida financial services company.

The Third District Court of Appeal of the State of Florida unanimously overturned the 2007 jury verdict against the firm and ordered that the case be retried in the 1st Circuit Court, finding the firm was placed in an unfair position to defend itself in an unusual three-phase trial.

BDO Seidman CEO Jack Weisbaum welcomed the appeals court decision. “We have consistently stated that we were confident that the jury’s erroneous verdict in this case would be reversed on appeal. The addition of punitive damages at the time only served to emphasize the injustice that took place at the trial court.”

Weisbaum vowed the retrial would give BDO Seidman the chance to show it acted consistently at all times with its professional obligations and that its audit opinions were based on the proper application of generally accepted auditing standards.

Banco Espirito Santo, lead counsel, Steven Thomas said, “We are pleased that the effort and hard work the jury put into this case was recognized by the appellate court, and we specifically note that the court did not dispute BDO unethical conflicts of interest or its negligence.”

Supreme Court Decision on PCAOB Constitutionality Decision Expected Monday

On December 7, 2009, the Supreme Court heard oral arguments in the case of The Free Enterprise Fund v. Public Company Accounting Oversight Board. This case involves the constitutionality of the appointment provisions for members of the Public Company Accounting Oversight Board (PCAOB). Under the Sarbanes-Oxley Act (SOX), PCAOB members are appointed by the SEC. The plaintiffs claim that the appointment clause renders the PCAOB unconstitutional because board members are not appointed by the President, subject to confirmation by the Senate.

In an amicus curiae (friend of the court) brief supporting the PCAOB, the CAQ observed that, “Although only a few years have passed since the passage of [SOX], the evidence demonstrates that regulation by the PCAOB has led to substantial progress in meeting Congress’ goals of improving audit quality and increasing investor confidence.”

More to come next week.