You Can't Make This Up: MF Global Sues PWC, Blames It For Its Collapse
File this one in the "you can't make it up" category. Over two years after the MF Global collapse, in which the primary dealer headed by Jon "I don't recall" Corzine all but admitted it had engaged in the cardinal sin of any financial intermediary, i.e., commingling money, to cover up a trade gone horribly bad and which resulted in the disappearance of some $1 billion in client funds until such time as the bankruptcy process managed to "liberate" funds from other part of the company, MF Global has suddenly figured who is at fault: not the CEO, not his brown-nosing lackey, not some janitor meant to be scapegoated precisely in a situation such as this, not even the infamous "glitch" - no, the party that is accountable for the firm's theft of client funds, and horrible investing decisions that led to its bankruptcy, are the accountants.
No really: yesterday MF Global Holdings sued PricewaterhouseCoopers LLP for $1 billion, alleging accounting malpractice helped bring down the brokerage company.
Like we said, you can't make this up. From Bloomberg:
PwC, which provided outside auditing and accounting experts, failed to advise the firm to account properly for its European sovereign debt holdings, leading it to over-invest in them, MF Global Holdings said in a complaint filed today in Manhattan federal court.
“But for PwC’s erroneous accounting advice, MF Global Holdings could not have -- and would not have -- invested heavily in European sovereign debt to generate immediate revenues and would not have suffered the massive damages that befell the company in 2011,” MF Global Holdings said in the complaint.
MF Global filed for bankruptcy on Oct. 31, 2011. Customers have claimed in lawsuits against the firm’s former executives that more than $1.6 billion of their funds that should have been segregated went missing, transferred to other parts of the company during the liquidity crisis.
Christopher Atkins, a PwC spokesman, didn’t immediately return a voice-mail message seeking comment on the suit.
In retrospect: almost brilliant. MF Global, or what's left of the estate, is using the old tried and true "Enron defense", where if there was corporate criminality, the accountants were surely involved. And they most probably were. There is one problem though: in the case of Enron, all of its key executives, Lay, Skilling and Fastow, got prison sentences. In MF Global's case of Jon Corzine... not so much.
Why? The answer:
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