How Much Will Tyco Cost PwC?
As I’ve mentioned before, the Big 4 do not have to disclose their reserves for pending legal issues to anyone. Does the PCAOB know? Does the SEC know? Do even their partners know? I think in a firm like PwC, only the highest level partners probably work with this info, given its sensitivity. They refer to the pending lawsuits as “matters” just like their lawyers refer to the SEC violations of their clients. Don’t forget – PricewaterhouseCoopers’ lead partner on the Tyco case, Richard P. Scalzo, was barred by the S.E.C. from auditing public companies. The commission said that from 1999 on, Mr. Scalzo had good reason to doubt the honesty of Mr. Kozlowski and Mr. Swartz, but did not pursue proper auditing procedures that could have uncovered the fraud. Go get your favorite jam. These guys are toast!
Anyone want to wager what PwC’s likely settlement will be for Tyco given this huge settlement by Tyco themselves?
Update from Crain’s publication, Financial Week:
“Tyco International settled a securities class-action lawsuit today for accounting fraud, but two claims remain against the conglomerate’s former auditor, PriceWaterhouseCoopers, for securities fraud and malpractice…While the audit firm’s liability on Tyco is as yet unknown, “It will be in the billions,” said Jay Eisenhofer, managing partner at Grant & Eisenhofer, one of the three firms representing plaintiffs in the case…”
Tyco Paying $3 Billion to Shareholders
CONCORD, N.H. (AP) _ Tyco International Ltd. said Tuesday it has agreed to pay about $3 billion to settle shareholder claims that arose after former Chief Executive Officer Dennis Kozlowski and other top officers were charged with looting the company and inflating its value.
Tyco said it would set up a $2.975 billion cash fund to pay claims filed by former shareholders and turn over half of any money it recovers from ongoing lawsuits against Kozlowski, former Chief Operating Officer Mark Swartz and former board member Frank Walsh, lawyers for the shareholders said…
Tyco said it would take a charge of $2.975 billion during the current quarter. Tyco’s shares gained 12 cents to $32.31 in early trading Tuesday.
The settlement covers shareholders from December 1999 to June 2002 and, in some of the consolidated cases, investors who owned stock starting in October 1998, the company said.
Lawyers for the shareholders said it was the largest settlement ever by a single corporate defendant in a class action suit and that it would top $3 billion, including interest.
‘’This is a fantastic resolution and closes a chapter on one of the largest and most appalling examples of corporate fraud in U.S. history,’’ said Jay Eisenhofer, managing partner at Grant & Eisenhofer.
‘This is a settlement of historic proportions for the investors who suffered significant financial losses and it also sends a strong message to those who would engage in this type of misconduct in the future,’’ said Richard Schiffrin, of Schiffrin, Barroway, Topaz & Kessler.
Shareholder claims against the company’s former auditor, PriceWaterhouseCoopers, are still pending, the lawyers said…