Who Is The PwC Partner Responsible For MF Global? Someone With A Lot of Baggage

Last Friday I wrote a fairly long column in Forbes.com that revealed the name of the PwC partner who led the MF Global audit. It was not so much a reveal – the name is an open secret amongst those who are involved in the case – but an act of transparency.

Caleb Newquist at GoingConcern.com followed up with a column highlighting the policy issues that this case raises. But, I fear, many still don’t get it. It’s not about audit quality. It’s about auditor quality.

It is, in spite of what PwC says, about the partner not the firm.

Everyone who knows who the PwC partner is has some legal, ethical, or personal reason for not disclosing or discussing her identity or her career history in public or disclosing it to journalists. The only people that didn’t know the identity of the PwC partner or her career history were investors and the customers of MF Global who lost money.

Independent sources tell me Linda McGowan was the partner in charge of the MF Global audit until its demise. A LinkedIn profile, which has not been confirmed as authentic by PwC or the partner, says she led the MF Global audit from 2005 to 2010. (PwC did not issue an audit opinion for the firm for 2011 since MF Global filed bankruptcy prior to year end.) That coincides with MF Global’s pre-history as well as its limited time as an independent public company. Man Financial, also a PwC audit client, bought the brokerage in 2005 from the bankrupt, fraud-ridden Refco then spun it out of Man Financial in 2007 as an independent public company. MF Global was an independent firm barely four years before filing for bankruptcy in October 2011.

The most important components of this story were confirmed with people not LinkedIn. The LinkedIn detail was just gravy. When I asked PwC for a comment on the story, the day before, I did not mention the LinkedIn profile. I knew if I did it would be taken down immediately. Anyway, don’t the firms, whose business model is based on client confidentiality and trust, have some kind of policy about how much client detail a partner or anyone else should be putting out in public about client engagements?

Since I could not get the profile confirmed in advance, I caveatted the information from it extensively. The profile was edited – not taken down – by Monday after the column ran last Friday. It took the whole weekend for McGowan, or maybe a young person in her family, to clean up what was a very revealing and very messy profile. But given that it was edited, not taken down, I think we can assume that it was McGowan’s creation.

Here’s what I saw before the column was posted. (If you go now to her profile it’s just PwC and her university.)

There is a whole career here, a lot of engagements, many of which were led simultaneously. I guess if you’re the go-to broker-dealer audit partner, you get a lot of work.

The key to understanding whether a particular partner has been corrupted, compromised, and lost their skepticism is to look at how many times they have been close to or involved in near misses or failures and yet escaped without a scrape. For example, McGowan can serve as the partner who leads the Goldman Sachs broker-dealer audit, as part of the larger audit, forever with no rotation or other regulatory constraint. Why would Goldman Sachs want someone to lead their broker-dealer audit for years who also led the failed audit at MF Global, who presided over poor internal controls at Knight Capital and Barings, and perhaps was there, as a consultant, when Deutsche Bank tried to figure out what was going on with $12bn of paper losses on complex derivative transactions during the financial crisis? That situation blew up in whistleblower claims.

That’s easy to answer. McGowan is possibly well-known in the industry as “someone you can work with”.

All you have to know about McGowan’s likely “go-along, get-along” style with clients – I hear it’s the opposite with staff and coworkers –  is to know her history with the Madoff feeder funds. If you’re looking for someone who won’t look behind closed doors, won’t look under the covers or peek behind the curtain, it looks like everyone knows you hire McGowan.

The consolidated class action complaint, In Re Santander-Optimal Securities Litigation, states:

Starting at least as early as 2004, PwC Bermuda and PwC U.S. conducted procedures on Madoff which were then communicated in written form to the various PwC member firms that actually issued the audit opinions for the Madoff feeder funds, such as PwC Ireland for Optimal SUS. These procedures on Madoff were conducted at least twice, in December 2004 and again in December 2006.

PwC U.S. and PwC Bermuda visited BMIS, in New York City, on at least two separate occasions and conducted cursory audit procedures of Optimal SUS’s assets being managed by BMIS…the attendees to the meeting with Madoff are disclosed as, Linda McGowan (“McGowan”) and Scott-Watson Brown (“Brown”). McGowan is a partner at PwC U.S., and based in PwC’s office in New York City at 300 Madison Avenue – about ten blocks from Madoff’s offices in the Lipstick Building. Brown was a partner at PwC Bermuda, based in Hamilton, Bermuda.

In December 2004, PwC partners McGowan (PwC U.S.) and Brown (PwC Bermuda) visited Madoff at BMIS’s offices in New York City. The purpose of the visit was to review the investment procedures employed by Madoff concerning BMIS’s management of Optimal SUS’s assets.

Indeed, the Report (“PwC Madoff Report,” Ex. 6) generated from that meeting expressly states that the review was being conducted on behalf of Optimal Multiadvisors, which includes Optimal SUS. Although the report, printed on generic PwC letterhead, purports to “document” BMIS’s management “procedures,” the conclusions contained therein are based exclusively on PwC’s interview with Madoff himself and his own, self-serving representations.

Neither McGowan nor Brown made any attempt to verify Madoff’s statements, and instead simply transcribed his unsubstantiated assertions into the Report and turned it over to PwC Ireland. PwC Ireland then, notwithstanding the cursory nature of the review, relied almost exclusively on PwC U.S. and PwC Bermuda’s December 2004 visit to BMIS, and the resulting Report, to sign-off on its 2004, purportedly comprehensive, audit of Optimal SUS.

McGowan and Brown had the chance but, apparently, never caught the Wizard of Lies in his fibs. (Diana Henriques’ book is highly recommended.)

Back in November of 2010, I made the following statement when I found out that the Big Four audit firms had cooperated with the UK government, at least in their minds, to hide the insolvency of UK banks from the public and investors:

No one knows whether similar meetings were held between audit leadership and the Federal Reserve Bank and US Treasury. No one has asked them to testify before a Congressional Committee. When their presence in meetings at Goldman Sachs and AIG, for example, was exposed via emails and correspondence subpoenaed by Congressional investigators, the names were redacted at their request.

Contracts with the Treasury and the New York Federal Reserve Bank are similarly redacted. We can’t trace whether the audit firm professionals working for the government now are the same ones working for their clients who failed. We can’t check that those who looked the other way when balance sheets were manipulated and assets valued unrealistically are the same ones now advising how to optimize the value of those same assets for the taxpayer. We are unable to verify if the same partners who failed us at the banks, at AIG, at Lehman, and at Bear Stearns are now managing their assets for the taxpayer.

That’s why we need to know who the audit and other key partners are on these public company and taxpayer-funded contracts.

We need to know what other KPMG clients Scott London could have used to enrich his social status and his wife’s jewelry box given his role as leader of the Southern California audit practice.

We need to know that Deloitte put an audit partner who worked on the WaMu audit to work on the Deloitte consulting contract to calculate JP Morgan’s foreclosure exposure from WaMu and Bear Stearns, another Deloitte audit client now owned by JP Morgan.

We need to know that Deloitte’s Nick DiFazio, who was sanctioned for his role on the Delphi audit and flipped to support the SEC’s complaints against Delphi executives is still working for Deloitte leading its IFRS initiative.

We need to know about the former Big Four partner who led the audits of two crisis-era mortgage originator failures and is now still working in the mortgage industry as a CFO. (Story to come.)

The global audit firms have grown too big and admit they can’t manage to detect or prevent “rogue” partners. In fact, the firms have well-known policy of not looking for trouble where everything seems to be going along fine and profitably. Deloitte’s failure to control inside trader Vice Chairman Thomas Flanagan and KPMG’s failure to see Scott London had gone off the rails demonstrate that the Big Four audit firms are too big and too loosely managed to expect real partnership-type monitoring like what goes on in most global law firms.

We need to see the partners’ names and their career histories because it’s now up to investors to see to whom, specifically, we are paying hundreds of millions of audit fees. It’s important for the integrity of the capital markets for ubiquitous industry expert ghosts, who leave investors and taxpayers holding the bag, to become more visible.

12 replies
  1. highwaytoserfdom
    highwaytoserfdom says:

    Careful Francine this is a Don Quixote’s attack on windmills even suggesting the FED printed reserves and insurance payoffs to the wind of synthetics and swaps as a Krugman stimulus or Friedman “trickle down” in today’s environment is seditious. As a trained audit journalist it is amazing what conscientious pursuit can bring about…. extremely relevant. Thank You. Just follow the money…

  2. Jeff
    Jeff says:

    I’m a bit surprised ( or maybe I shouldn’t be?) that you bought into this being her real LinkedIn page. The multiple mis-spellings of Goldman Sachs, the variations of proper capitalization of PwC, the multiple entries, the apparent lack of partner rotation for public company clients, the inclusion of only one client name on which she wasn’t a client, the listing of her as an “audit ptr” in 1980, the year she graduate college? Listed as the partner on Barings after just 10 years at the firm? All of these items individually scream “fake”; together they make the profile completely unreliable. Using it as a source, even with disclaimers, is terribly irresponsible.

  3. Francine
    Francine says:


    I agree with you it is terribly sloppy. I have not yet bought into it completely as authentic for that reason, meaning it is her creation, but I am not sure the info is necessarily fake. The point of the article is that very few people know the detailed dates and places of a Big Four partner’s career. And if it was not hers, why wouldn’t she and PwC have it deleted as a fake rather than edited? Why would a faker edit it?

    It is a highly caveatted source. And I have had no one in a week, including her and PwC, refute her lead of MF Global and involvement in Madoff feeder funds (that would be pretty much impossible.) No one has refuted any other facts of the LinkedIn profile either. MF Global and the Madoff connection are, to me, the most important and are enough to raise questions. I posted the LinkedIn profile to see if I could get some corrections or changes or someone to admit or deny the facts. There’s a method…

  4. Francine
    Francine says:


    Also, she was not the lead partner on some of the larger clients like Goldman Sachs but the partner on the broker-dealer audit. ( I know who lead partners have been on other FS clients like GS and JPM and AIG, for example.) There is no rotation requirement there. Partner rotation is only post Sarbanes, 2003 or so, and we’ve seen with Skechers that partners are rolling off and rolling back on. They can also retain another partner role on the client other than lead indefinitely as long as its not concurring. Auditing only the broker-dealer is not constrained under rotation. I don’t find the Barings situation as odd as I do the use of the term partner throughout but that can possibly be written off as ego and lack of willingness/ernergy to document full career track. The first engagement is not labeled as partner role, DBL, but I can imagine she may have been promoted to partner while working at CCMC.

  5. Jeff
    Jeff says:

    I don’t know. I think it is far more responsible, journalistically, to confirm before you publish. Imagine someone anonymously posted a story that Francine McKenna embezzled millions of dollars from her former employer, and then I linked to that story and expanded on it in length. No matter how much I “caveatted” the story, it’d still have the words “embezzle” and “Francine McKenna” in it, side by side. The lack of a refutation is not a confirmation, and ethically you should have confirmation before publishing something like that.

  6. Francine
    Francine says:

    I should have confirmation before publishing someone’s background posted on a public site intended for that purpose like LinkedIn? LinkedIn is a reliable source for additional information about a professional’s background. That’s why people put up a profile. I should get confirmation because the information is “something like that”, that is, surprising and embarrassing rather than flattering? Maybe you forgot what it means for information to be newsworthy. LinkedIn references are not comparable to posting wild speculation about criminal activity from an anonymous source, as you allude. As I mentioned in a previous comment at Forbes, all the big media does it and no one I’ve asked asks the subject if the profile is authentic. You are responsible for your social media presence, especially on reputable sites that others use for commerce. If it was fake, LinkedIn and/or the subject should take it down, not edit it.

  7. Francine
    Francine says:

    @Jeff, And if someone posted a story about me embezzling millions I would sue them because it is not true. No one suing me or LinkedIn, as you can see.

  8. FlyCat
    FlyCat says:

    Well, they did name David Duncan in Enron…..so its not TOTALLY unheard of to name the partner. Would you name only the lead partner? The concurring review partner? The QA partner? Where is the line?

    Honest questions. not trying to be obnoxious.

  9. Francine
    Francine says:


    When there’s a failure the audit firm and the lead partner are often sued. Lately, it seems, the audit firm may be sued but the partner responsible is not named in the suit. The only time the public sees the name of the partner for a failed company or an audit failure is in a lawsuit or an action by the SEC or PCAOB against the person. Duncan ended up in civil and criminal litigation so there was no question we would know. PwC has not yet been named in all MF Global suits and the partner has not been named in any of the ones PwC is already a defendant in. Therefore, open secret.

    Many critics of audit partner name transparency (has nothing to do with signing or not signing the audit report) say if you want to know the partner name go to the annual meeting. That doesn’t help the potential or former investor and that doesn’t help the public as a whole. No one can track the career history of active audit partners and the ones who end up in industry or the government, including their disciplinary or litigation history, by trying to figure out one by one only the current lead partner of public companies. I believe there should be a registry of all key partners on each public client and that their disciplinary and litigation history should also be included as well as education and all licensing credentials. This would include lead, concurring, tax, advisory, specialty and any business unit leads like McGowan was for broker-dealers. We should be able to look up a name and see its history. You should be able to look up a public company and see all the partners from the firm that have been involved so you can track rotation history and fees relationships especially for tax and other consulting.

    We should be able to see if partners who escaped or were dropped from being named individually in failures – because the partner and the audit firm cooperated with plaintiffs or regulators to make a stronger case against executives or board members – have nine lives.

  10. James Ulvog
    James Ulvog says:

    (With tongue firmly planted in cheek)

    Not sure I understand why the discussion is focused on how much or little you used a LinkedIn profile. Seems a more serious issue is the performance of one particular partner. The most serious issue is the depressingly effective argument that creates for transparent naming of key audit partners.

    Oh, wait a second….If I talk about the LinkedIn profile does that mean I don’t have to revisit my considered opinion that disclosing partners’ names isn’t necessary?

    Now I get it.

    So, Francine, about your extensive use of that LinkedIn profile….

    (remove tongue from cheek)

Trackbacks & Pingbacks

  1. […] it up to the audit firms to tell us what they think we should know, we end up with a partner like Linda McGowan of PwC . She not only presided over the failure of MF Global but failed to warn anyone, based on […]

  2. […] The Auditors – Who Is The PwC Partner Responsible for MF Global? Someone With A Lot of Baggage – Continued discussion by Ms. McKenna about the PwC partner. A very minor secondary point is […]

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