MF Global's $1B suit against PricewaterhouseCoopers to go before jury
NEW YORK — A federal judge on Wednesday ordered PricewaterhouseCoopers to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the October 2011 bankruptcy of MF Global Holdings Ltd., a brokerage run by former New Jersey Gov. 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.
“This line of causation gives rise to a plausible claim that PwC proximately caused harm to MF Global,” Marrero wrote.
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.
Marrero on Wednesday noted that factors such as how MF Global employees implemented Corzine's strategy might 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 dismissed breach of contract and unjust enrichment claims against PwC.
Caroline Nolan, a PwC spokeswoman, said, “We respectfully disagree” with the decision to let the case go forward.
She said PwC's audit of MF Global complied with professional standards and that MF Global's treatment of the repurchase-to-maturity transactions was consistent with generally accepted accounting principles.
Daniel Fetterman, a partner at Kasowitz, Benson, Torres & Friedman, representing the administrator, said: “We are pleased with Judge Marrero's well-reasoned decision, and look forward to presenting our case to a jury.”
Before its rapid demise, MF Global had struggled with worries about the sovereign debt, credit rating downgrades, margin calls, and news that money from customer accounts was used to cover liquidity shortfalls.
Brokerage and commodity customers have since recovered nearly all of their money.
Marrero on July 9 rejected PwC's argument that the MF Global administrator “stands in the shoes” of the company under the “in pari delicto” legal doctrine and cannot recover because Corzine and other officials were also at fault.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pennsylvania Game Commission reaps revenue from shale gas under game lands
- University of Pittsburgh researchers revisit war of electric currents
- As historic breakup nears, Alcoa works to redefine its ‘advantage’
- Energy Spotlight: Minking Chyu
- Small stores take big gamble by not upgrading credit card readers
- Program lets public service workers be forgiven for student debt
- Older workers try to cut back on hours at job
- Yahoo investors losing patience with ‘star’ CEO Marissa Mayer
- Batteries key to alternative energy’s success
- Nutritional supplement makers, led by GNC, want to create voluntary safety standards
- Asian bug threatens oranges in Florida