PWC is to face a $1bn (£600m) lawsuit over claims that the firm’s bad accounting advice was a substantial cause of the 2011 collapse of MF Global.
US District Judge Victor Marrero on Wednesday said the Big Four firm’s advice on “repurchase-to-maturity” transactions through which then-chief executive Jon Corzine bought $6.3bn of European sovereign debt affected how MF Global implemented its strategy and in turn contributed to its alleged losses, Reuters reports.
“This line of causation gives rise to a plausible claim that PwC proximately caused harm to MF Global,” Marrero wrote in a judgement released yesterday.
The judge also noted that the way MF Global employees implemented Corzine’s strategy could have substantially contributed to the company’s losses, and said a jury would need to decide who was liable. Marrero dismissed breach of contract and unjust enrichment claims against PwC.
Caroline Nolan, a PwC spokeswoman, told Reuters, “We respectfully disagree” with the decision to let the case go forward.
She also 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.
MF Global and its parent company, MF Global Holdings Ltd, collapsed in October 2011 after investors left the firm on learning about Corzine’s bets on sovereign debt.