NEW YORK: The administrator of MF Global Holdings Ltd’s bankruptcy plan on Friday sued the auditor PricewaterhouseCoopers (PwC) for at least $1bn over its advice on a $6.3bn European sovereign debt investment that helped fuel the brokerage’s rapid demise.
According to a complaint filed in US District Court in Manhattan, PwC committed professional malpractice by offering “flatly erroneous” advice concerning, and approval of, the off-balance-sheet accounting treatment for the debt by MF Global and its then-chief executive, Jon Corzine.
The complaint said PwC knew that the investment would add significant risk to MF Global’s already weak finances. It said MF Global would not have taken on the exposure, which allowed it to book immediate revenue, had it received sound advice.
“PwC’s professional malpractice and negligence were a direct and proximate cause of massive damages the company suffered,” the complaint said.
Caroline Nolan, a PwC spokeswoman, said the accounting treatment that is the subject of the complaint has been examined by trustees, regulators and a congressional committee. Corzine invested $6.3bn in debt of countries such as Belgium, Ireland, Italy, Portugal and Spain. Reuters
