Overview
Cohen Milstein represents participants and beneficiaries of the BDO USA Employee Stock Ownership Plan (ESOP) in a putative class action against BDO USA, the board of directors, and BDO ESOP trustees for violations of Employee Retirement Income Security Act of 1974 (ERISA) in connection with the sale of BDO stock to the ESOP at an inflated value.
The ESOP participants and beneficiaries claim, among other things, that BDO USA’s board of directors ensured that control of BDO was kept in the hands of management rather than the ESOP, used inflated revenues to value BDO, and engaged in a self-dealing transaction on August 31, 2023 involving the ESOP purchasing 42% of the company’s common stock for approximately $1,300,000,000 – a purchase price that exceeded fair market value.
The participants believe that had the defendants provided truthful information concerning BDO’s past and future financial performance and ensured that the ESOP trustee conducted the rigorous due diligence required by ERISA, the ESOP would not have purchased the company’s stock at such an inflated price.
Important Dates
- On January 17, 2025, Taylor v. BDO USA was filed in the United States District Court for the District of Massachusetts
Case Background
The complaint alleges that prior to the August 31, 2023 transaction, BDO had come under scrutiny by the Public Company Accounting Oversight Board for violations of PCAOB rules and audit standards. It also alleges that for years leading up to the transaction, the PCAOB had found a higher level of significant deficiencies in BDO’s audit work than any other audit firm reviewed by PCAOB.
Rather than find an arm’s-length purchaser for their shares that would scrutinize BDO’s financial position and PCAOB violations, the company’s executives allegedly created a captive buyer for their shares through the creation of the ESOP.
Furthermore, the complaint alleges that the ESOP participants and beneficiaries were not permitted to negotiate the terms or purchase price of the company stock that executives would offload into employees’ retirement accounts. Rather, the lawsuit alleges that the company’s Board of Directors selected a trustee that they believed would acquiesce to the Board’s will.
The complaint also alleges that despite the ESOP purchasing company stock, neither employees nor the ESOP obtained control over the company’s future cash flows or strategic direction. Even worse, the Board allegedly adopted an ESOP governance structure such that the ESOP itself was controlled by BDO’s executives shortly after the ESOP Transaction. BDO’s Executive Team thus allegedly retained control and power over the ESOP including the right to vote all shares held by ESOP. As a result, BDO executives allegedly received $1.3 billion for selling 42% of their BDO stock but did not give up control over the company.
Plaintiff also claims that the BDO executives who were responsible for facilitating the transaction faced a substantial conflict of interest, as their personal fortunes were tied to the valuation they could obtain for the company’s stock.