by Brian Mahany
Once again, a large accounting firm has been sanctioned for its poor practices in serving as an independent auditor. Investors and lenders depend on accurate audited financial statements. When the independence of the auditor is compromised, so is the integrity of our financial system.
Recently the Securities and Exchange Commission (“SEC”) sanctioned Pricewaterhouse Coopers for it’s auditing of Satyam Computer Services Limited. By the auditors’ failure to be diligent in their audits, the government says that Satyam’s massive internal accounting problems went undetected for years.
As a result of the federal investigation, the Pricewaterhouse’s India affiliates agreed to pay $6 million in penalties and Satyam agreed to pay $10 million.
Is that the end of the issue? Probably not. As the result of the internal fraud at Satyam, investors lost tens of millions.
Investors and creditors rely on accurate financial information when making investing decisions or deciding to lend credit. We trust third parties such as auditing firms, transfer agents and rating agencies to diligently complete their duties. Unfortunately, there is an inherent conflict of interest in these relationships. The auditor has a duty to remain independent and unbiased, yet the company being audited is the one paying the fee.
When fraud is uncovered, victims will often sue the direct participants. If the direct participants can’t foot the bill, then the gatekeepers are the next targets. In the Satyam case, the price of the stock fell from $29 to $1.80 immediately after the scandal broke. Investors who lost money are likely to seek redress from Pricewaterhouse.
Pricewaterhouse will likely be paying a much higher bill then the $6 million sanction from the SEC. Whether it can survive the backlash and lawsuits from Satyam remains to be seen.
Victims of investment schemes often fail to understand that they may have a right of recovery against third parties. Independent auditors are the usual gatekeepers but rating agencies, transfer agents and others may also be liable for the losses.
If you are the victim of a Ponzi scheme or investment fraud, contact an experienced fraud recovery lawyer. Many victims only sue the promoter and receive pennies on the dollar. An experienced asset recovery specialist can help recover against all responsible parties including the gate keepers.
Mahany & Ertl is a boutique law firm concentrating in securities fraud and asset recovery. We help people across the U.S. recover their hard earned money. For a confidential, no nonsense consultation, contact Brian Mahany at (4140 704-6731 or by email at
Mahany & Ertl, LLC – Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine