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PwC dragged into Satyam class action suits
February 06, 2009 19:54 IST
In a new class action lawsuit over the Satyam [Get Quote] scandal, global audit major PwC, along with its Indian and international units, has been charged with having 'recklessly disregarded' a multi-year massive fraud by the former management of Satyam, which is already facing many such cases in the US courts.
The lawsuit has been filed in the US District Court, Southern District of New York, by Pomerantz Haudek Block Grossman & Gross LLP law firm against Indian IT firm Satyam, its former chairman B Ramalinga Raju, his brother B Rama Raju and Satyam's outside auditors PricewaterhouseCoopers Pvt Ltd, Price Waterhouse and Pricewaterhouse Coopers International Ltd.
The suit was filed on behalf of purchasers of Satyam's American Depository Receipts between January 6, 2004 through January 6, 2009.
'In addition to allegations of fraud against Satyam and the officer defendants, the complaint alleges that PwC was aware of, or recklessly disregarded, a multi-year massive fraud by Satyam management to overstate the company's earnings and concocting $ 1 billion of cash that didn't exist,' the law firm said in a statement.
'The case further alleges that PwC ignored red flags that should have alerted it to the fraud, and moreover, failed to perform its audits in accordance with the requisite accounting principles,' it added.
Price Waterhouse, the Indian unit of the global audit major, has been maintaining that it followed all the standard accounting principles while auditing the books of Satyam Computers. However, it also said that its auditing on Satyam could be construed invalid if the statements made by Raju in his admission letter on January 7 about the fraud were correct.
Raju had said that the financials of the company were incorrect for past several years, thus inflating the profit and cash position and under-stating the liabilities.
Two partners of PwC have been arrested in India in connection with their audits of Satyam.
Disclosure of the stunning fraud at Satyam materially impacted the price of the company's ADRs. Trading in the company's ADRs was briefly halted after the fraud was revealed, and the ADRs are now currently trading just below two dollars, a precipitous drop from the company's 52-week high of 29.84 dollar, the law firm said.
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