A lawsuit against PricewaterhouseCoopers (PwC) seeking $1 billion in damages will be allowed to go to trial. It is alleged in the suit that the firm’s bad accounting advice was a substantial cause of the October 2011 bankruptcy of MF Global Holdings Ltd, a brokerage run by former New Jersey Governor Jon Corzine. U.S. District Judge Victor Marrero in Manhattan said PwC’s advice on “repurchase-to-maturity” transactions, through which Corzine bought $6.3 billion of European sovereign debt, affected how MF Global implemented its strategy and in turn contributed to its alleged losses. Judge Marrero wrote in his order: “This line of causation gives rise to a plausible claim that PwC proximately caused harm to MF Global.”
MF Global’s bankruptcy plan administrator sued PwC on March 28, accusing it of professional malpractice for having provided “flatly erroneous” accounting advice to the company. Corzine is not a defendant. Judge Marrero noted that factors such as how MF Global employees implemented Corzine’s strategy might also have been major causes of the New York-based company’s losses. But he said a jury, not a judge, should sort out who was liable. The judge did dismiss breach of contract and unjust enrichment claims against PwC.
Source: Claims Journal