LISBON: The administrator of MF Global has agreed to a short delay in its $3bn malpractice suit against PwC, which it accuses of sanctioning a scheme that allowed the company to amass ruinous amounts of European sovereign debt.
The world’s second-biggest professional services firm was the auditor of MF Global, which collapsed in October 2011 after huge bets on the debt of Italy, Portugal and other nations.* The suit alleges that MF Global relied on PwC’s “flatly erroneous” accounting advice when it bought the bonds by using “repurchase to maturity” financing transactions. The administrator is seeking damages of $2.8bn-$3.1bn, including interest.
Jury selection for a trial in New York was scheduled to begin next week, but on Monday US District Court judge Victor Marrero allowed a three-week delay for mediation. Neither side said it was prepared to give ground.
“They are public watchdogs, certified public accountants,” said Daniel Fetterman, a partner at Kasowitz, Benson, Torres & Friedman, representing MF Global. “They owed a duty to get the accounting right, and they failed.”
PwC noted that the company’s strategy was developed by Jon Corzine, the former New Jersey Governor and chief executive of Goldman Sachs, who took charge of MF Global in March 2010. The $6.3bn of debt which he amassed was based on an assumption that the EU would come to the rescue of its troubled economies, averting defaults.
