PwC Moscow – Still Breathing, Barely

Wow!  A story about an audit firm, the foreign office of an audit firm in the WSJ!

One of my frequent laments is that US media barely covers the audit firms, leaves them out of most news about the scandals unless it’s hitting them in the face, always believes whatever the audit firm PR folks tell them.  They rarely push the firms for the story behind their PR puffery.
Ok, maybe I’m exaggerating a little.
There are exceptions.  WSJ did a great job on coverage of EY’s role in WalMart’s attempted tax dodge. Floyd Norris at the NYT gets it, but not always all of it.  Jonathan Weil is a pit bull.
But, otherwise, serious journalism in traditional US media about the firms and their role in global capital markets is minimal.
Compared to the Financial Times, who regularly covers the industry thanks to the excellent Jennifer Hughes and her predecessors, I think most US media are intimidated by the firms and their business.  They can’t or won’t see the Big 4’s involvement and potential complicity in the other stories they write.
So, it was a shock to see this story today.  I’ve been writing about this case and PwC’s other international and domestic office issues for a while.  The WSJ seems to have just noticed that maybe it’s not a good thing if PwC’s license is pulled in Russia.  Or that when a firm’s offices are raided, it may have been news.  Or if a firm pulls all of its prior audits from the public record, there may be an interesting story behind it and an ugly mess someone should be explaining.
Look at the bottom of the story text. No Sphere content. No related stories. No other prior stories about the same issue cited.

PWC Wins Right to Appeal Ruling on Russian Tax Case

PricewaterhouseCoopers LLC won a reprieve from a Russian appeals court Monday in a closely watched case in which lower courts ruled the auditor was an active participant in tax evasion at now-bankrupt oil giant OAO Yukos.

Overturning a lower-court order issued in January, the Federal Arbitration Court for the Moscow District ruled that PWC’s Russian unit has the right to appeal the ruling against it. Yukos, once Russia’s largest oil company, was slapped with tens of billions of dollars in back-tax claims and largely nationalized in a case that several foreign courts have ruled was a politically motivated attack on its billionaire owner, Mikhail Khodorkovsky. He is serving an eight-year prison term for tax evasion.

PWC was Yukos’s auditor. After facing back-tax claims of its own, as well as other official pressure, the firm last year withdrew its audits of the oil giant, which had endorsed Yukos’s tax strategies.

But PWC’s legal problems persisted, as appeals courts upheld the ruling that it actively aided Yukos’s tax evasion from 2002 to 2004. That judgment could have threatened Pricewaterhouse’s auditing license in Russia, though regulators so far have made no move against the group.

“We are pleased that the decision provides us a further opportunity to defend our position in the appeals court,” a PWC spokeswoman said in an emailed statement, referring to Monday’s ruling. “We have always maintained that the claim has no legal merits.”

The firm also is preparing an appeal to the Supreme Arbitration Court of its own back-tax claims.

10 replies
  1. Anonymous
    Anonymous says:

    Yukos was killed in another of a long line of Putin hits. Anyone who was associated with Yukos was hur tin the process. I think you’re letting your distaste for PwC get in the way of the larger picture, that freedom is regulated from the executive branch in Russia. It’s almost gotten to the point where oif you want to stay safe you had better replace the photo of your wife on your desk with a photo of Putin a la the days of Stalin.

  2. Francine McKenna
    Francine McKenna says:

    Even though I love to travel and will entertain the idea of going just about anywhere, (I recently had someone talk me into Turkey in exchange for a personal tour of my Mexico City…) there are two places I have no interest in – Russia and China. If I die having been everywhere else but these two countries, I will have no regrets about my life.

  3. Mary Anne
    Mary Anne says:

    How can you say that? When we went for that quickie 4 Star weekend to Tokyo we never imagined that would have appealed to us and it did! We loved it and would love to go back. We discovered Harajiku and Ginza districts etc. We enjoyed the serenity of the temples and found a new appreciation and insight into the Japanese culture and people. How could you say that you just are not interested in discovering the qualities of two massive and unique countries and cultures like Russia and China! You surprise me sometimes! SIS

  4. Chicago Accountant
    Chicago Accountant says:

    The biggest threat to the capital markets of Russia is not PWC, it’s the Russian government. I don’t know the facts of this case, but odds are it’s not just an audit failure.

    Francine, I know you are well traveled. However, sometimes you need to travel to not-so-nice places to learn about the world. Russia and China are both on my travel list. However, I want to make it back to Europe and the Middle East first.

  5. Francine McKenna
    Francine McKenna says:

    @ChicagoAccountant Thanks for setting up the ID. It helps in being able to connect to you specifically.

    I have lived and worked a lot of places. One of my first trips twas to teach English in Chiapas Mexico (where they had the Zapatista rebellion in ’95) I also had responsibility for practices and people in Colombia and Venezuela when I was with BearingPoint. In fact, I’d go anywhere on the African continent if given the opportunity. I’ve only ever been to Morocco.

    But this isn’t about my travels. It’s about PwC and Moscow. When a firm has to withdraw their audits and when their offices are raided, I think there is probably something there. The Big 4 firms do business in all kinds of places. Russia is not the most dangerous, corrupt, or unpredictable. Just take a look at my posts about Deloitte and Iraq. So my point is that this is a big albatross around PwC’s neck. The need to get to the bottom of it for the sake of their global franchise, and I use the term franchise literally.

    Since you are local, perhaps we can get together sometime in Chicago over coffee or something stronger to talk more about our travels…I promise to wear very dark sunglasses.

  6. Anonymous
    Anonymous says:

    I’ve been to South Africa twice in the past year (both Johannesburg & Capetown) on Big 4 business. Wonderful country in a most fascinating cultural and economic transition. Fantastic people. Huge problems, including roving criminal gangs. But I would go back anytime.

  7. kedzi pascal
    kedzi pascal says:

    i want to be an employe of pwc in moscow, i am an ACCA PART II STUDENT AND A DEGRE IN APPLIED ACOUNTING.LIVING IN DUBAI,

  8. kedzi pascal
    kedzi pascal says:


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