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The tiny Arizona business auditing Donald Trump’s media company was kicked out of a national accountancy alliance because it took on work for him, a lawsuit claims.
Phoenix-based Semple, Marchal & Cooper stepped in as auditor for Trump’s social media business in May after its previous accounting firm was shut down for running what regulators called a “massive fraud”.
The new client immediately caused tension with accountancy giant BDO, which provided software and training to SM&C under the terms of an alliance of firms dating back to 1994, according to a lawsuit filed by Semple against BDO Alliance USA and the BDO executive in charge of the partnership.
BDO, the sixth-largest US accounting firm by revenue, said that it would terminate Semple’s membership of the alliance unless it dropped Trump Media & Technology Group as a client, the suit claims. It terminated the relationship as of June 30 2024.
According to the lawsuit, when he was asked why BDO was angered that SM&C had taken on TMTG as a client, BDO executive Michael Horwitz “yelled in response, ‘Because he [the principal shareholder] is a criminal!’”
At the time of Semple’s appointment, Trump was on trial in New York accused of falsifying business records in connection with hush money payments to the porn actor Stormy Daniels. He was eventually convicted. His main business, the Trump Organization, had also been convicted of fraud in an unrelated civil case.
Trump owns a majority stake in TMTG, which runs the social media platform Truth Social and has had difficulty holding on to an auditor. Its first pick, Withum, quit after less than a year after deciding it did not want to be associated with a Trump business venture, the Financial Times reported.
BF Borgers, the tiny Colorado firm that took TMTG as a client after Withum’s stepped away, was shut down by the Securities and Exchange Commission because it did barely any work to verify its clients’ financial statements, perpetrating a “massive fraud” on those who used its services and the investing public, the SEC said.
TMTG is among just a handful of public companies SM&C has audited, and significantly larger than the one public company it listed as a client earlier in 2024. The firm has 32 staff, according to a regulatory filing, including 20 accountants.
TMTG, listed on Nasdaq, has a market capitalisation of more than $5bn.
BDO has more than 300 US accounting firms in its alliance, bestowing practical support, business referrals and marketing benefits on tiny firms without its national reach.
“While members are independent firms charged with their own professional decision making, BDO Alliance USA has the rarely used right to sever that relationship when quality and other issues are present, including in a context where a significant and complex engagement is undertaken with limited experience and staffing,” the alliance said in a statement.
It said that SM&C’s allegations were “frivolous and lack any foundation in the reality of why BDO Alliance USA chose to exercise its right to sever its relationship”.
SM&C founder Robert Semple said his firm had “no comment on the complaint, as it is self-explanatory”. He added: “BDO’s comments are untrue and defamatory and will be dealt with in our amended complaint.”
SM&C’s suit claims BDO “engaged in misconduct by demanding in bad faith” that it “compromise its independence” by allowing BDO’s political views to “infect” SM&C’s role as an auditor of a publicly traded company.
Its termination from the alliance meant it was “forced to rework all its materials and documents and retrain its employees at significant financial cost”, it said, and led to the false implication that it had engaged in misconduct.
TMTG did not respond to a request for comment.
https://www.ft.com/content/9b26a1c8-b953-43b6-8885-6133b31f6a6a
