The Curious Case of PwC And Its Telecom (and Technology) Clients

I’m starting to get interesting emails, from folks who may or may not have their own agenda, but who certainly know more about some things than I do.

A little while ago, after writing about the BDO litigation, I received an email from someone who had quite a bit of information and very strong opinions about the issues in that case.

That person also told me about the suicide of one of the BDO partners involved in the case at an earlier stage. After writing about the litigation, I started to see Google Searches looking for more info on the “BDO executive suicide,” including daily ones for a while by someone at the US State Department. Makes you wonder…

Then yesterday, as a result of my writing about the Siemens bribery scandal and perhaps as a result of the link from The Daily Caveat, I received this email:

“I found your blog last week while investigating/researching a related matter. Your discussions regarding Siemens accounting issues are compelling reading. Were you aware that Siemens is extensively involved with Nokia and that they have various joint ventures such as Nokia Siemens Networks?

Nokia’s head of legal was killed last week. Apparently he accidentally fell off a balcony at a Swiss hotel and this news seems to be getting suppressed and or very little attention in the press. The man’s name is Carl Belding. I find the Belding story to be VERY odd. How many grown men of significant business stature “accidentally” fall off a balcony to their death in the country known for it’s financial anonymity??”

We have continued to correspond, as the writer, who is a “significant investor in Qualcomm” seems to think I can help to identify and bring additional exposure to what he believes is “Nokia management that is boastful, bordering on arrogant, abusive and less than forthright in their public pronunciations regarding their current legal status and negotiations with Qualcomm. I believe their “negotiating position” in these matters is perhaps not as favorable as they have lead their investors to believe, and that an unfavorable (for Nokia that is settlement with Qualcomm will take place within the next 12 months.”

Well, this is heady stuff for me. Far be it for me to get involved in such a nasty dispute and the potential it has for negative impact all the way around. And my interest is the Big 4.

So what’s the hook?

Well, with a hunch and a little digging, it was easy to put one obvious connection on the list of co-winky-dinks:

PwC is the auditor for both Nokia and Qualcomm.

So what you say? Well, interestingly enough, Siemens’ new Chief Auditor, the one they just announced in their latest shakeup and attempt to prove they are doing something about their mess, is Hans Winters, a current partner at PwC who will take the job as soon as he severs that relationship…

Ok, so there are only so many poor schmucks who would take the job of Chief Auditor at Siemens right now. It had to be a guy who thinks it might be fun to go from the frying pan that is PwC Netherlands into the fire at Siemens.

But still, who cares?

Well, Nokia and Siemens have just entered into a joint venture which is more like an Enron SPV in its insularity. There are only Siemens or Nokia executives on its Board, even though it racked up Euro 3.4 billion in sales for the 2nd quarter of 2007, its first in business.

It had a rather inauspicious start-up.

“The second quarter 2007 was the first quarter of operations for Nokia Siemens Networks. Net sales were negatively impacted primarily by competition related issues as the price competition in the infrastructure market was unusually aggressive. Net sales were also impacted by challenges related to the start of operations, including delayed purchases by customers to a greater extent than expected, increased management focus on integration, and implementation of the previously announced compliance program, which also required certain management attention.

Nokia Siemens Networks second quarter operating profit was negative EUR 1.3 billion, with an operating margin of -36.8%. The reported second quarter 2007 operating profit included a charge of EUR 905 million related to Nokia Siemens Networks restructuring costs and other one time charges. The operating profit for the second quarter 2007, excluding these charges, was negative EUR 361 million,with an operating margin of -10.5%…”

Back to the poor guy, Mr. Belding, Nokia’s General Counsel, who “fell off the balcony”. Mr. Belding joined Nokia at the beginning of 2006 after 20 years as IBM’s VP and General Counsel for Europe, Middle East and Asia.

Any guess who is IBM’s auditor? Righto! PwC!

Nokia is currently in some heated litigation with Qualcomm over licensing of patents for WCDMA technology, very high stakes, very serious stuff. Mr Belding was the point person on this litigation.

On the other side, Qualcomm has had some turnover in their General Counsel’s seat.

Qualcomm, the second-biggest maker of chips that run mobile phones after Texas Instruments, named Donald Rosenberg, the outgoing general counsel of Apple, as its new top lawyer.

Rosenberg, who will join Qualcomm on Oct. 8, was previously general counsel at International Business Machines.

So, Mr. Rosenberg, the new GC at Qualcomm, arch rival in litigation with Nokia, was Mr. Belding’s boss at IBM!

So why did Mr. Belding “fall off a balcony” in Switzerland?

Is it because he had confided in Mr Rosenberg about either the Qualcomm litigation or some other issue at Nokia and/or Nokia Siemens Networks before Rosenberg took the job and now could not face him as an opponent?

Was it because Belding was mixed up in something with Nokia Siemens Networks that has something to do with Siemens usual business practices? Too much to bear…

Maybe it has something to do with the Enron style conflict of Mr Belding signing SEC disclosures for the business dealings between Nokia and the Nokia Siemens Network entity as both GC of Nokia and GC of the joint venture?

Or does it have something to do with a woman? This woman, a former communications consultant to Mr. Belding at IBM, was so fortunate to have him write a glowing endorsement of her book and includes Mr. Belding as a personal reference on her CV?

As far as PwC, their fingerprints are all over this story. It’s interesting to read the disclosures or lack thereof in both Nokia’s and Qualcomm’s Annual Reports about their pending litigation. Both reports have almost the word for word, exact same text that basically, in following FAS 5 says that there is no reserve and no disclosure necessary. How does it work when an audit firm is on all sides of such heated litigation?