Newark, NJ: (Sep-07-07) A class action lawsuit was brought against BDO Seidman, the former auditor of failed cheese company Suprema Specialties, and several others, alleging that they should have known about a massive fraud that doomed the business. The securities class action case has been pending since early 2002, when Paterson-based Suprema evolved from a high-flying public company to one raided by the FBI and bankrupt. Since then, federal prosecutors have secured six guilty pleas and two convictions against former employees or customers who participated in the scheme. Authorities said Suprema inflated sales by $560 million in the seven years before its collapse. The fraud involved a series of fake transactions with its major customers. The scheme not only boosted sales, but also allowed Suprema to borrow more and more money from lenders. In addition, the company's rosy but phony financials helped it sell some $41 million in stock to eager investors during a November 2001 stock offering.
Although a federal judge dismissed the class action case and a companion case brought by two hedge funds in 2004, an appeals court reinstated the lawsuits early in 2006. In a settlement reached, BDO Seidman, former board members Rudolph Acosta Jr., Paul Desocio and Barry Rutcofsky and underwriters Janney Montgomery Scott, Pacific Growth Equities and Roth Capital Partners agreed to pay $19 million to resolve the class action lawsuit. [STAR LEDGER: BDO SECURITIES]
