The Federal Deposit Insurance Corp. last week settled its lawsuit against the accounting firm BKD LLP, just days before the trial was scheduled to begin in U.S. District Court in Little Rock.
Timothy McNamara, the chief legal officer for BKD, told Whispers last week that he couldn’t comment on the terms of the settlement.
“But BKD is pleased to have the matter resolved,” he said. “BKD looks forward to continuing to serve our clients throughout Arkansas with integrity and excellence.”
The FDIC declined to comment.
If you recall from last week’s front-page story, the FDIC had sued BKD in 2013 for failing to uncover the massive fraud that led to the 2010 failure of First Southern Bank of Batesville.
BKD, which is headquartered in Springfield, Missouri, and has a large office in Little Rock, denied any wrongdoing. 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 simply 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.