Sunday 18 February 2018

Madoff investors blasted PwC over funds audit

Irish accountants caught up in Ponzi scheme row

Nick Webb

Nick Webb

Investors who lost fortunes when the infamous €65bn Bernie Madoff scam collapsed made sensational allegations against the Irish operations of 'big-four' accountancy firm PricewaterhouseCoopers (PwC).

Some of Madoff's clients invested with his empire through so called 'feeder funds', which essentially channeled their money to Madoff's investment group.

These funds were often owned by big banks, which used them to provide well-heeled private clients with investment opportunities. A number of these feeder funds were registered in Ireland.

The Optimal funds were controlled by the giant Spanish bank Banco Santander. PwC Ireland audited the financial statements of two of these Optimal feeder funds between 2003 and the end of the 2007 financial year.

Revelations that Madoff had been operating a giant 'Ponzi scheme', in which he was in effect using new clients' money to pay seemingly massive returns to existing clients, saw his empire vaporised in 2008. Madoff was sentenced to 150 years in prison.

It is thought that investors lost up to €65bn in the labyrinthine scheme.

A barrage of lawsuits was launched against investment advisers and those banks which had placed client money with Madoff.

In June 2009, a number of European and South American investors -- both private an institutional -- launched a class-action lawsuit against Banco Santander for investing their money with Madoff through the Optimal funds.

PwC Ireland was named as a defendant in the case heard in Florida District Court. It declined to comment last week when contacted by the Sunday Independent.

"As you know, we don't comment on client matters," said a spokeswoman for the Dublin firm.

The claims against PwC Ireland relate to its audit of the Optimal feeder funds.

Investors allege that the audit should have uncovered issues with the Madoff operation, according to the court documents obtained by this newspaper.

PwC Ireland was paid an audit fee of $26,000 (€19,600) in 2006 and a further $37,000 (€27,900) in 2007 -- fees the investors claim were barely enough to cover travel costs to the US.

Last May, up to 20 European banks agreed a $15.5bn (€11.7bn) settlement with some of Madoff's clients.

It is thought that Banco Santander paid $235m (€177m) as part of the settlement. Following this, the Florida court case was dismissed. PwC Ireland declined to say whether it now faces further legal action.

PwC Ireland's link with the Madoff investors underlines the close connections between the Irish financial community and the rogue financier's empire.

Last November, the Sunday Independent revealed that Madoff had funnelled client funds through accounts in Anglo Irish Bank's London operations to bankroll his extravagant lifestyle.

A US court case had alleged that up to $16m (€12m) was shifted from Anglo Irish Bank and Barclays Bank accounts in London to his family's accounts, before being used to buy a vintage Aston Martin and to part-fund the purchase of a 75ft luxury yacht.

Earlier this year, it emerged that HSBC's Irish arm was facing lawsuits in Ireland by investors over how it performed as custodian for money lost in the Madoff Ponzi scheme.

Sunday Independent

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