More than two years later, the Ballenger Construction Co. bankruptcy of late 2012 still is reverberating in Texas.
Surety Liberty Mutual Insurance Co. reached a settlement in December with accountant Padgett Stratemann & Co., Ballenger's auditor. Liberty Mutual had filed a negligent misrepresentation lawsuit against Padgett Stratemann in April, 2013, charging that the surety relied on Ballenger's audits when issuing bonds used by Ballenger on 37 projects.
Federal Judge Randy Crane approved the settlement, filed Dec. 17, in U.S. District Court in McAllen, Texas.
The terms were not disclosed and most such settlements include nondisclosure clauses. The Dallas-based attorney for Liberty Mutual, Keith A. Langley, could not be reached for comment. Nor could the managing partner of Padgett Stratemann.
At the time the lawsuit was filed, Liberty Mutual estimated its potential costs in meeting obligations as Ballenger's surety at $50 million.
In the different versions of its complaint, Liberty Mutual cited audits of Ballenger's balance sheet dated March, 2011. Liberty Mutual's complaints also made extensive use of Padgett Stratemann's marketing materials, including claims by the company and its employees that sound and reliable audits were vital for winning surety bonds.
Ballenger worked mainly for the Texas Dept. of Transportation, which requires that prospective bidders submit audited financial statements.
Padgett Stratemann, responding to the complaint, claimed that Liberty Mutual had relied on other sources of information about Ballenger, which was based in Harlingen, Texas, prior to issuing the bonds and that the surety had missed several red flags in the audit that provided clues to possible trouble.
Padgett Stratemann, on its website, says it was founded in 1945 and is based in San Antonio with offices in Austin and Houston. Its website says the company has a "diverse client base of over 125 construction-related businesses in Texas."