Judge rejects PwC’s request For mistrial In MF Global case
In an unsurprising move, the judge overseeing bankrupt commodities broker MF Global’s $3 billion suit against PwC rejected the accounting firm’s request for a mistrial, saying PwC’s lawyers can challenge MF Global’s arguments in court over the rest of what is expected to be a five-week trial.
PriceWaterhouseCoopers asked for a mistrial in a midnight filing Sunday, saying lawyers for the administrator of MF Global’s estate switched strategies on the eve of trial, abandoning the theory that PwC’s incorrect accounting allowed MF Global to amass a $6.3 billion portfolio of European sovereign debt, which in turn caused the company to collapse. In opening arguments and friendly questioning of former MF Global Chairman Jon Corzine, those lawyers instead tried to establish the story that the Euro bond strategy was sound but that PwC’s errors caused confusion and a loss of confidence in MF Global’s finances.
In an order filed this morning, U.S. District Judge Victor Marrero rejected PwC’s claim it was the victim of “trial by ambush” because it had prepared for a different theory of causation in the three years before the trial started last week.
“PwC had sufficient notice prior to the time it filed this motion to conclude that the Plan Administrator alleges that PwC’s advice caused a crisis of confidence in MF Global’s financial statements,” the judge wrote. In its complaint, MF Global blamed PwC for allowing sale accounting for repurchase-to-maturity contracts under which MF Global actually regained ownership of the bonds two days before they maturity, saying PwC wouldn’t have embarked on the strategy without PwC’s blessing.
Corzine walked away from that premise in his testimony, saying MF Global could have bought the bonds with or without sale accounting. But in its complaint, MF Global also made broader claims that PwC’s mistakes, including bad advice on whether to write down a deferred tax asset, led to a big earnings disappointment and loss of faith in September 2011 that triggered a liquidity crisis and bankruptcy.
“Although PwC may well be surprised” by the theory of causation advanced in the first days of the trial, the judge wrote, “PwC cannot at this late stage claim to be prejudiced.”
“The weeks remaining should afford PwC sufficient time to respond to any shift it perceives in the Plan Administrator’s theory,” he concluded.
In a statement, PwC attorney Richard Marooney with King & Spalding said:
“We are confident in our position and expect to win this case on the merits, regardless of the causation theory the Plan Administrator decides to utilize. The bottom line is that PricewaterhouseCoopers had no role in any of the events that led to the demise of MF Global.”
Source: Forbes
