PwC faces pounds 400m lawsuit over Maxwell audit failure

THE WORLD'S largest professional services firm, PricewaterhouseCoopers (PwC), faces the prospect of a pounds 400m lawsuit in the wake of yesterday's record punishment from the accountancy profession's watchdog over its role in the Maxwell affair.

Observers believe lawyers preparing the negligence claim against the firm will feel their case is strengthened by the report from the accountants' Joint Disciplinary Tribunal that found that Coopers & Lybrand, now part of PwC, and four of its partners failed to meet the required professional standards in auditing various parts of the Maxwell empire.

The claim is being brought by Grant Thornton, which took over from Price Waterhouse as administrators of Maxwell Communication Corporation in 1997 after PW announced it was merging with Coopers. Although Coopers' role at MCC was not covered by the Joint Disciplinary Scheme investigation, it is believed that the report's description of the firm's method of operation could help build a picture of how it worked in other parts of the business group controlled by the late Robert Maxwell.

The case is not due to reach court until 2002, but it could possibly be settled out of court before then. Last year, Coopers' merger partner, PW, and Ernst & Young settled the $11bn claim launched against them in 1991 by liquidators to the collapsed Bank of Credit and Commerce International for just $125m.

The report brings to an end a five-year investigation into one of Britain's most serious financial scandals. It concentrated on Mr Maxwell's private companies and publicly-quoted Mirror Group Newspapers.

Coopers points out that it has not been alleged that the firm caused direct financial loss or caused or facilitated the collapse of the Maxwell empire by its omissions. But the disciplinary tribunal - Roger Henderson QC, who acted as chairman, Ian McNeil, former partner at Moores Rowland and past president of the Institute of Chartered Accountants; and John Platt, a retired executive with venture capitalists 3i - found that a lack of objectivity in dealing with Mr Maxwell and his companies lay at the heart of many of the 35 complaints laid against the firm and the four partners.

"The complaints reveal shortcomings in both vigilance and diligence and a failure to achieve an appropriate degree of objectivity and scepticism, which might have led to an earlier recognition and exposure of the reality of what was occurring," it said. It added: "The firm lost the plot."

In addition to ordering PwC and four of its partners to pay fines and costs totalling nearly pounds 3.5m, the tribunal censured the firm and one partner, John Steven Cowling.

Two of the other three partners - Stephen Richard Wootten and Nicholas Paul Richard Parker - were admonished. The fourth, Ian Robert Steere, was ordered to pay a share of the costs.

Peter Smith, senior partner of PwC, said in a statement that the firm "fell short of the very high standards we set ourselves". Adding that this was "a matter of deep regret", he pointed out that the Joint Disciplinary Tribunal report made clear that the auditors were the "victims of deliberate deceit".

Peter Hazell, the firm's managing partner, said the affair was "a source of embarrassment for us", but added that he and his colleagues would be seeking to persuade clients to stick with the firm by pointing to the major changes made to the way in which they carry out audits.

Coopers and the Maxwell affair

n July 1971 - Government report describes Maxwell as "a person who cannot be relied upon to exercise proper stewardship of a publicly- quoted company".

n 1972 on - Coopers & Lybrand appointed auditors of nearly all Maxwell- controlled companies and their pension funds at that time and as they later came into existence.

n 5 November 1991 - Robert Maxwell falls off yacht , sparking the collapse of the his media empire and the discovery of massive frauds. In particular, a pounds 400m "black hole" was revealed in the Maxwell company pension funds.

n Early 1993 - Accountants' Joint Disciplinary Scheme (JDS) begins investigation of role of Coopers & Lybrand as auditors of Maxwell empire.

n 1994 - Coopers attempts to halt inquiry pending lawsuit by administrators of Maxwell Communication Corporation (MCC).

n February 1995 - JDS investigation resumes.

n 14 November 1997 - JDS disciplines former Maxwell executives, Michael Stoney and Jonathan Ford.

n Late 1997 - Grant Thornton takes over from Price Waterhouse as administrator of MCC responsible for dealing with negligence action against Coopers as a result of conflict arising from announcement of merger between PW and Coopers. The claim is likely to total about pounds 400m and is not due to come to court until 2002.

n 27 April 1998 - 35 complaints laid against Coopers and 24 against four individual partners - John Steven Cowling, Ian Robert Steere, Stephen Richard Wootten and Nicholas Paul Richard Parker - in relation to Mirror Group Newspapers and other Maxwell companies in the period 1988 to 1991.

n October 1998 - Joint Disciplinary Tribunal chaired by Roger Henderson QC and accompanied by Ian McNeil, a retired partner in Moores Rowland and past president of the Institute of Chartered Accountants, and John Platt, a retired head of 3i, considers complaints.

n January 1999 - Coopers informed of tribunal's findings and given one month to appeal.

n 2 February 1999 - Report published showing Coopers and the four partners ordered to pay a total of nearly pounds 3.5m in fines and costs. The firm and Mr Cowling are censured, while Mr Wootten and Mr Parker are admonished.

PROMOTED VIDEO
News
people
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
News
i100
Life and Style
fashion
News
videoJapanese prepare for the afterlife by testing out coffins
Arts and Entertainment
Harrison Ford attends Blade Runner at Target Presents AFI's Night at the Movies at ArcLight Cinemas on 24 April, 2013 in Hollywood, California
film... but Ridley Scott won't direct
Sport
Hughes is hit by a bouncer from Sean Abbott
cricketStephen Brenkley on batsman's tragic flaw that led to critical injury
Sport
Dejected England players applaud the fans following their team's 3-0 defeat
football

News
people

Actress isn't a fan of Ed Miliband

News
ebooksNow available in paperback
News
The Bounceway, designed by Architecture for Humanity
newsLondon to add 'The Bounceway' to commuting options
Life and Style
Stefan Gates with some mince flies
food + drink
Arts and Entertainment
Rooney Mara plays a white Tiger Lily in forthcoming film Pan
filmFirst look at Rooney Mara in Pan
Life and Style
Customers browse through Vinyl Junkies record shop in Berwick Street, Soho, London
tech
Life and Style
health

Do you qualify – and how do you get it?

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

h2 Recruit Ltd: Business Development - Telecommunications - £50,000 OTE

£25000 per annum + £50,000 OTE: h2 Recruit Ltd: London, Reading , Southend, Al...

Day In a Page

Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
Colouring books for adults: How the French are going crazy for Crayolas

Colouring books for adults

How the French are going crazy for Crayolas
Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

What would you do as a local politician faced with an impossible choice of cuts?

Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

Call me Ed Mozart

Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
10 best stocking fillers for foodies

Festive treats: 10 best stocking fillers for foodies

From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
Phil Hughes head injury: He had one weakness – it has come back to haunt him

Phil Hughes had one weakness – it has come back to haunt him

Prolific opener had world at his feet until Harmison and Flintoff bounced him
'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

'I am a paedophile'

Is our approach to sex offenders helping to create more victims?
How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital