The auditor at accounting firm BDO USA LLP tried to act casually while wandering around the firm’s New York offices, striking up conversations with colleagues about the firm’s audit of the large insurer AmTrust Financial Services Inc. Unknown to the colleagues, a tiny recording device disguised as an ordinary Starbucks gift card was capturing every word. The auditor was taping on behalf of the Federal Bureau of Investigation and cooperating as a whistleblower with the Securities and Exchange Commission, the Wall Street Journal reported today. The clandestine recordings in 2014 were part of a continuing federal investigation being led by the SEC, according to people familiar with the matter. The focus of the probe includes accounting practices of AmTrust, a fast-growing, New York-based insurance company that in recent years has attracted skepticism about its results from investors betting against its stock. The SEC’s Fort Worth, Texas, office is leading the probe, and it isn’t clear how far along the investigation is. The auditor, who was directly assigned to AmTrust audits for at least three years but has since left the firm, has been working since 2013 with a larger group that includes Harry Markopolos, a forensic accountant who warned the SEC about the Bernard Madoff Ponzi scheme before it became public in late 2008.
