“When it comes to dealing with dirty money, are CAs and lawyers potentially just as guilty as the criminals themselves?”
The above question was one of the highlights of the International Money Laundering Conference in Canada. It prompted me not only to write a previous post, but also to take a closer look at auditors. Then PwC and the Greencore scandal hit the news. I knew I had to start digging, and I uncovered the Russian scandal. Imagine that PwC was in danger of having its auditing licence suspended in Russia, and that it was actually suspended in Japan! Just look at the list below! This may just be the tip of the iceberg. Who would dare to sue PwC?
Don’t Cry for PwC!
In 2007, according to Yahoo Finance, PricewaterhouseCoopers International Limited made US $25 billion! PwC’s revenue growth was up 14.4%! Now if headquarters is thriving, the branches may be fine too. The fines that the various PwC branches had to pay may seem huge to the individual, but they may actually be just minor business expenses for the huge conglomerate. Once upon a time, auditors did all they could to avoid being sued. It now seems to me that the emphasis has shifted to trying to please the people who pay the auditors’ fees - the board of directors.
Long Litany of Cases
The cases below have some similarities with the Kingsland Estates Limited situation. In some of the instances below, PwC inherited the situation from Coopers and Lybrand. Many of the cases are related to the valuation of assets. My opinion, based on the reports that I have seen, is that PwC is willing to take on long bruising battles in court! It will be interesting to see what happens with Nelson’s CDN $500 million case against PwC Eastern Caribbean Firm.
Here is the list. After the list is an expanded list, each item with a quote.

  1. July 25, 2008: PwC slapped with a $10 million verdict guilty of negligent misrepresentation
    in old people’s Nursing Home case.
  2. July 7, 2007: PwC agrees to pay $225M over a multibillion-dollar Tyco accounting fraud case
  3. June, 21 2006: Carrefour SA brings $120 million dollar suit alleging PriceWaterhouseCoopers conspiracy to defraud
  4. March, 29 2006: PwC settles dotcom fraud case
  5. May 10, 2006: PWC Japan unit suspended over Kanebo fraud
  6. Aug 22, 2005: Pricewaterhouse Ordered to Pay $120 Million in Suit
  7. Jan 13,2005: PwC calls it error, Federal Ohio judge talks of fraud
  8. Dec. 18, 2002: Office of the City Attorney, San Francisco, California PwC’s Cover-Up of Fraud
  9. October 05, 2001: PwC pays $51 million to settle audit fraud lawsuit
$10 Million Verdict Upheld Against PricewaterhouseCoopers
- Accounting firm loses appeal in case stemming from nursing home company merger - Fulton County Daily Report (USA) July 25, 2008

In the Cobb suit, the Kelletts, their partnerships and the trusts accused PwC and the Mariner executives of fraud, breach of fiduciary duty, professional negligence, negligent misrepresentation and racketeering. They sought more than $400 million and the banishment of PwC from doing business in Georgia [USA].
PwC Settles Tyco Investors’ Suit Over Fraud - By Linda A. Johnson
Associated Press
Saturday, July 7, 2007

PricewaterhouseCoopers agreed to pay $225 million to settle a class-action lawsuit brought by shareholders of Tyco International over a multibillion-dollar accounting fraud that ended with Tyco’s top executives going to prison.
Carrefour Reveals $120 Million Argentina Fraud Suit vs PwC June, 21 2006

Buenos Aires, Jun. 21 - In what could be one of the biggest fraud cases in Argentine history, French retailer Carrefour SA has alleged in a series of lawsuits that accounting firm PriceWaterhouseCoopers and one of its most high-profile Argentine clients conspired to defraud it in the sale of a local supermarket chain.
PwC settles dotcom fraud case Independent

Wednesday, 29 March 2006

E-District sought an AIM listing and issued a prospectus that, unlike many other internet companies, gave a picture of an enterprise that had a successful trading history and was being run at a profit. This was not the true picture, which emerged almost a year later. The turnover figures had been falsely inflated by a factor of 8, showing a profit of £80,000 while the company had actually suffered a loss of £380,000. Debtors and net assets were also inflated.
Some 110 private and institutional shareholders were suing PwC as both auditors and the “reporting accountants” that put their name to the company’s prospectus prepared for the £150m initial public offering. They argued that, had the true financial figures been known, the shares would have been worthless. The terms of the settlement were not disclosed.
PWC Japan unit suspended over Kanebo fraud - TOKYO, May 10, 2006 (Reuters) - Asia News TOKYO, May 10, 2006

Japan’s financial regulator imposed a two-month business suspension on accounting firm Chuo Aoyama PricewaterhouseCoopers on Wednesday over its role in a book-keeping fraud at cosmetics and textiles maker Kanebo Ltd.
Pricewaterhouse Ordered to Pay $120 Million in Newark Suit FindArticles - New Verdict Stirs Old Memories - NJBIZ, Aug 22, 2005, by Daks, Martin C

A RECENT $120 million civil verdict by a federal District Court jury in Newark moved the state’s longest-running civil suit to a new stage. The verdict, against co-defendants PricewaterhouseCoopers and the deceased president of a bankrupt firm called Ambassador Insurance, also stirred echoes of recent scandals.
PwC calls it error, judge talks of fraud
New York Times, January 13, 2005 A federal judge in Ohio has found that PwC failed to provide documents and other evidence

“In some cases, it is difficult to avoid the conclusion” that PricewaterhouseCoopers “engaged in deliberate fraud”, Judge Hemann wrote of occasions when the accounting firm discovered very late in proceedings that multiple versions of some documents sought by the two plaintiffs existed in different places. In concluding that a default judgment should be entered against PricewaterhouseCoopers, she also wrote that “there is strong evidence that documents have been destroyed, placing plaintiffs and Telxon in a situation which cannot be remedied”.
Abetting systematic fraud - Office of the City Attorney, San Francisco, California Dec. 18, 2002

Herrera’s brief reasserts a mountain of evidence — virtually unchallenged in the trial court — that PricewaterhouseCoopers issued clean audit opinion letters for Old Republic for ten years, abetting Old Republic in a systematic fraud that siphoned off millions in unclaimed escrow funds, overstated corporate income and cheated taxpayers of funds that should have been paid to the State of California. The City’s brief also contends that the state Department of Insurance did have authority to act — and would have acted — if PricewaterhouseCoopers had told the truth in its audit opinions.
PwC pays $51 million to settle audit fraud lawsuit - OUT-LAW News, 10/05/2001

The shareholders sued because they said PwC defrauded them when the firm approved an audit of MicroStrategy’s 1999 profit figures.

Disclaimer: The above post expresses my own opinions. The quotes are from published sources. I am not familiar with the situations described therein. Some of the quoted sources express unproven allegations. I invite others to express their views, both on my opinions and on the quotes. You may also email me confidentially at [email protected]