– You Can’t Make This Up: MF Global Sues PWC, Blames It For Its Collapse (ZeroHedge, March 29, 2014):
File this one in the “you can’t make it up” category. Over two years after the MF Global collapse, in which the primary dealer headed by Jon “I don’t recall” Corzine all but admitted it had engaged in the cardinal sin of any financial intermediary, i.e., commingling money, to cover up a trade gone horribly bad and which resulted in the disappearance of some $1 billion in client funds until such time as the bankruptcy process managed to “liberate” funds from other part of the company, MF Global has suddenly figured who is at fault: not the CEO, not his brown-nosing lackey, not some janitor meant to be scapegoated precisely in a situation such as this, not even the infamous “glitch” – no, the party that is accountable for the firm’s theft of client funds, and horrible investing decisions that led to its bankruptcy, are the accountants.
No really: yesterday MF Global Holdings sued PricewaterhouseCoopers LLP for $1 billion, alleging accounting malpractice helped bring down the brokerage company.
Like we said, you can’t make this up. From Bloomberg:
PwC, which provided outside auditing and accounting experts, failed to advise the firm to account properly for its European sovereign debt holdings, leading it to over-invest in them, MF Global Holdings said in a complaint filed today in Manhattan federal court.
“But for PwC’s erroneous accounting advice, MF Global Holdings could not have — and would not have — invested heavily in European sovereign debt to generate immediate revenues and would not have suffered the massive damages that befell the company in 2011,” MF Global Holdings said in the complaint.
MF Global filed for bankruptcy on Oct. 31, 2011. Customers have claimed in lawsuits against the firm’s former executives that more than $1.6 billion of their funds that should have been segregated went missing, transferred to other parts of the company during the liquidity crisis.
Christopher Atkins, a PwC spokesman, didn’t immediately return a voice-mail message seeking comment on the suit.
In retrospect: almost brilliant. MF Global, or what’s left of the estate, is using the old tried and true “Enron defense”, where if there was corporate criminality, the accountants were surely involved. And they most probably were. There is one problem though: in the case of Enron, all of its key executives, Lay, Skilling and Fastow, got prison sentences. In MF Global’s case of Jon Corzine… not so much.
Why? The answer:
The crook is the quickest to assert his truthfulness, the thief his honor, the liar his credibility.
Considering this, why does this surprise anyone? As for Price Waterhouse, they put the okay on Enron accounting, they have no credibility either.
Having been an auditor & by default having once been an employer of what has become a major world player in auditing similat to PWC, I know for a fact they do NOT carry out proper, in depth, detailed auditing.
They simply do random samples. Which opens up the business to massive opportunities to manipulate.
Whilst this does not exonerate the lovely man, it does qualify this particular argument.
To Squodgy: Random testing isn’t a viable practice for any accounting firm. My paternal grandfather was a banker in San Francisco for many years from 1920-1950. He spoke 7 languages, had been an interpreter for the allies in WWI. He handled all international funds and transaction and he never left that bank any evening without every penny being accounted for……..this sort of discipline is lost today. He was a decent man, would not recognize the ghouls in banking today.
If accounting firms can collect millions of dollars every year, they can do the damn accounting. As one who was a financial victim of such sloppy oversight, I think they should all be prosecuted and executed for their theft…..Jon Corzine stole over a billion dollars from his own depositors to pay his gambling debts, and he walks free. The people he stole from were those who invested using their own money………he needed real cash……..and there has been no recourse for those people…..it is a total outrage.
I am so sick of all these weasels…….I prefer what China does to these people, they execute them.
Agreed.
I too suffered at the hands of devious practice by the outfit I mentioned.
I complained & reported them to their Institute Professional Body.
They closed ranks & I was left out on my ear.
Five years later I met the senior accountant socially, and he came up, apologised and said my accusations were 100% accurate, and well documented, but they pay membership fees to stop any such problems being allowed to develop and taint the profession.
Made me feel so much better.