US$1Bn PwC malpractice suit proceeds

A US federal judge said that the plaintiff presented enough evidence for a material factual dispute, dismissing PwC’s motion for summary judgment.

A US federal judge has ruled that the US$1 billion lawsuit filed by a brokerage formerly run by a New Jersey governor and senator alleging PricewaterhouseCoopers (PwC) of professional malpractice can proceed.
In dismissing PwC’s motion for summary judgment, judge Victor Marrero of the US District Court for the Southern District of New York said that the administrator for MF Global Holdings, which folded late 2011, “has presented sufficient evidence to create a material factual dispute,” according to a report from The Wall Street Journal.
MF Global filed for bankruptcy in 31 October 2011 when it was being led by Jon Corzine, a former New Jersey governor and senator.
Administrators of the investment firm’s liquidation plan allege PwC provided “flatly erroneous” advice on an investment the firm made.
MF Global made a $6.3-billion bet in a structure known as “repurchase-to-maturity” on sovereign debt of some of the most indebted countries in the Eurozone.
Investors then became uneasy when this bet surfaced which, coupled with margin calls, credit rating downgrades and the use of customer funds to reinforce liquidity, led to the firm filing for bankruptcy. Administrators of the firm said up to $1.6 billion was borrowed by the firm from customer accounts which should have been segregated.
The federal court judge’s decision, a copy of which was published by Zero Hedge, noted that the complainant alleges PwC of “‘extraordinary and egregious’ professional negligence” in approving accounting for the sovereign debt bet.
This case, filed in 2014, is one of the last few cases related to MF Global. PwC last year agreed to settle a lawsuit connected to MF Global for $65 million in cash.
Daniel Fetterman, of the MF Global counsel firm Kasowitz Benson Torres & Friedman LLP, said that the ruling is a “significant victory,” according to The Wall Street Journal.
James P. Cusick, PwC’s lawyer, said that the investment firm’s demise “was caused by its own business decisions and adverse market events, not any accounting determination.”
PwC is also facing a $5.5 billion jury trial in Miami for allegedly failing to catch massive fraud that led to the collapse of mortgage lender Taylor Bean & Whitaker Mortgage Corp and Alabama’s  Colonial Bank, according to the Journal.

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