By Sneha Shankar - MF Global Holdings Ltd. sued Pricewaterhouse Coopers, or PwC, on Friday for about $1 billion, claiming that the accounting firm gave inaccurate advice that led to the firm’s fall in a more rapid pace, news reports said.
MF Holdings alleged that PwC had deliberately given wrong advice regarding a European sovereign-debt investment worth $6.3 billion, leading to professional malpractice (bad advice regarding off-balance-sheet accounting treatment for debts), Reuters reported, citing a filing in Manhattan's U.S. District Court. The complaint reportedly said that PwC knew that the investment would lead to significant risk but did not warn MF Global, which would not have taken the exposure.
"PwC's professional malpractice and negligence were a direct and proximate cause of massive damages the company suffered," the complaint reportedly said, according to Reuters.
According to the Wall Street Journal, PwC’s spokeswoman Caroline Nolan said: "During the two-and-a-half years since the collapse of MF Global, the repo-to-maturity accounting that is the subject of today's complaint has been examined by trustees, regulators and a congressional committee. None of them has found that the accounting for those transactions was incorrect. PwC is disappointed that this meritless claim has been brought."
MF Holdings had declared bankruptcy on Oct. 31, 2011, listing assets of $41 billion and debts of $39.7 billion. The customers had also claimed in previous lawsuits against MF Global’s former executives, including the company’s former chairman Jon Corzine, that more than $1.6 billion of their funds that should have been segregated went missing.
The company’s lawyers said that the company is seeking not less than $1 billion each for professional malpractice and breach of contract, and not less than $10.9 million in unjust enrichment, along with demanding a jury trial.
"This case arises out of PwC's extraordinary and egregious professional malpractice and negligence in its role as the long-time outside auditors and accounting experts for MF Global," the lawyers reportedly said in the suit according to the Journal.