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BKD Agrees to $4 Million Settlement with FDIC

2 min read

If you’ve been wondering how much the accounting firm BKD LLP agreed to pay the Federal Deposit Insurance Corp. to settle a federal lawsuit tied to the 2010 failure of First Southern Bank of Batesville, your Whispers staff has the answer: $4 million.

“BKD has denied and continues to deny that it has any liability in the” lawsuit, the settlement and release agreement reached last month said.

The case, you may recall, was settled just days before a trial was scheduled to start in U.S. District Court in Little Rock. The FDIC had sued BKD in 2013 for failing to uncover the massive fraud that led to the bank’s collapse.

The FDIC’s civil suit accused BKD of negligence and breach of contract and suggested damages of as much as $22.9 million.

“The case was hotly contested, but BKD certainly continues to stand by the work we did,” Timothy McNamara, the chief legal officer for BKD, told Whispers last week. “However, we made a business decision after lengthy negotiations to reach a compromise settlement to avoid the risk and the tremendous expense associated with litigation.”

BKD, which is headquartered in Springfield, Missouri, has a large office in Little Rock. It argued in its court filings that the bank’s own officers could have shut down former Little Rock attorney Kevin Lewis’ scam almost two years earlier had they done their jobs.

The FDIC, as First Southern’s receiver, said in its court filings that the firm should have caught the red flags when its accountants audited the bank between June 2009 and June 2010.

Lewis, 47, pleaded guilty to one count of bank fraud for a complex, multiyear scheme in which he manufactured phony property owner improvement district bonds, sold them to banks as investments and used them as collateral on bank loans. He is serving a 10-year sentence in federal prison at Memphis. Scheduled for release in January 2021, Lewis also was ordered to pay $39.5 million in restitution to nine banks in what is considered the largest fraud ever prosecuted in Arkansas.

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