BIG SIX - #150m claim against PW
Price Waterhouse is this week defending itself in the High Court against a #147m negligence lawsuit brought by Bank Austria, one of Europe’s largest banks.
Bank Austria claims the Big Six firm provided negligent advice during its #33m purchase in 1990 of Sovereign Leasing, a UK leasing company which specialised in dealing with small and medium-sized businesses.
The bank claims PW, which was hired to carry out the due diligence into Sovereign and provide corporate finance advice, failed to detect serious problems with the company, which would have showed that the business was making heavy losses and was almost worthless.
Bank Austria adds that it relied heavily on PW’s advice and if it had known Sovereign’s true financial state was based on a mixture of inadequate provision for bad debts and aggressive accounting policies, it would not have gone ahead with the purchase.
The bank claims that following the takeover of Sovereign, it was forced to inject a further #111m into the company to restore it to profitability before being able to off-load it to Girobank in 1996.
PW said it ‘acted entirely properly in keeping with the highest standards normally associated with one of the world’s top consulting and business advisory firms’. The firm said it would defend itself with the ‘utmost vigour’.
Accountancy Age understands that PW’s defence will be based around its insistence that it had given sufficient warnings about the financial state of Sovereign and that it was vulnerable to a downturn in the economy.