BKD: Arkansas bank failure was caused by executive's fraud

Springfield-based accounting firm BKD LLP is laying blame for the 2010 collapse of First Southern Bank in Batesville, Ark., on the failure of bank officials and officers to identify the fraud of former Little Rock attorney Kevin Lewis, Arkansas Business reports.

The bank closed in late 2010 after it was revealed that all of the $23.3 million in improvement district bonds it purchased from Lewis over a two-year period were fraudulent.

In 2011, Lewis was sentenced to 10 years in federal prison and ordered to pay $39.5 million in restitution to nine banks after pleading guilty to one count of bank fraud. The incident is considered to be the largest fraud case ever prosecuted in the Natural State.  

As receiver of the bank, the Federal Deposit Insurance Corp. sued the bank’s accounting firm, BKD, in 2013. The federal civil lawsuit seeks $17.5 million in damages. In an answer filed by BKD last month, the firm denied allegations of wrongdoing and argued that a majority of the fault lies with the bank itself and not BKD. In its answer, the accounting firm said it was the bank’s decision to buy Lewis’ bonds and that First Southern also didn’t bother to conduct a background check on Lewis.  

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