Richard Inserro joined PricewaterhouseCoopers (PwC) in 2000 and spent eight years in the on-deck circle as a Director, according to his lengthy LinkedIn profile. Inserro was finally elected to the partnership effective July of 2013. That’s a process that takes more than a year and that some go through more than once before making it. Sources close to the investigation confirmed that NYDFS sent PwC a subpoena before a settlement with PwC’s client Bank of Tokyo-Mitsubishi UFJ (BTMU) was announced on June 20, 2013. PwC promoted Inserro in spite of knowing an investigation by NYDFS into its twelve-month long “historical transaction review”, or HTR consulting engagement at BTMU that began in June 2007 was already underway.
Details of a NYDFS settlement with PwC related to its work at BTMU, announced Monday, describe an unnamed PwC Director who “elevated his apparent concern for client satisfaction over the need for objective inquiry.” A person close to the PwC investigation identified Inserro as the PwC Director referred to by NYDFS. PwC will pay a $25 million fine and endure a two-year ban for improperly altering the BTMU HTR report submitted to NYDFS. That fine is two-and-a-half times as large as the one Deloitte paid NYDFS for similar charges for its work at Standard Chartered Bank a year ago and PwC’s ban is twice as long.
Inserro knew what he was doing. The NYDFS PwC investigation discovered several emails that Benjamin Lawsky, the Superintendent of Financial Services for New York, characterized Monday as examples of a consultant going along with a “whitewash”. In one instance Inserro warned that a PwC memorandum describing how the bank stripped incriminating language from a wire message was “probably correct, but the bank or [its attorneys] may get all twisted up about this affirmative statement.”
PwC knew that Inserro’s emails, and the firm, were already under investigation prior to promoting him in July 2013. NYDFS began the investigation of PwC while it negotiated a settlement with BTMU for $250 million, finalized in June 2013. Deloitte also settled in June for its enabling actions at Standard Chartered.
PwC’s U.S. Advisory Services Leader Miles Everson issued a statement Monday, meant to reassure us, that “PwC is proud of its long history of contributing to the safety and soundness of the financial system…” Monday’s NYDFS press release, however, expressed disappointment that no one at PwC ever disciplined Inserro or provided feedback that his comments might raise significant questions about the firm’s objectivity if anyone else read them.
PwC’s actions betray its true values. PwC promoted Inserro to the partnership, a reward for siding with a miscreant client against its regulator, while he and the firm were under investigation. The regulator allowed PwC to quietly “retire” two partners who were responsible for review and supervision of the BTMU HTR, John C. Campbell and Bruce Roland, as confirmed by a source close to the NYDFS investigation. A PwC spokesperson, Caroline Nolan, had no other comment on the NYDFS settlement other than the Everson statement and would not confirm if Inserro was the Director referred to by the regulator or confirm the names of the retired partners..
Many believe only the four global audit firms—PwC, Deloitte, KPMG and EY —and specialized financial services consulting firms such as Promontory Financial Group are qualified to monitor legal and regulatory compliance in the largest financial services firms. Promontory is still under investigation by NYDFS. PwC is now prohibited from helping New York banks comply with federal and state laws for two years.
Deloitte’s Financial Advisory Services Consulting one-year ban for lack of objectivity and compromised professional independence at Standard Chartered Bank expired in June of 2014.
Superintendent Lawsky must be thrilled to see Deloitte back on the job.