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PwC accused of 'gross negligence' in US action

The Dublin office of accounting firm PricewaterhouseCoopers (PwC) has been named in a class action suit just filed in the United States by investors who lost money as a result of the $50bn fraud perpetrated by New York financier Bernard Madoff.

In legal documents filed in Miami, a class action suit being led by investors from Argentina and Chile has levelled accusations of "gross negligence" against PwC in Dublin in its capacity as auditor of Optimal Multiadvisors, the fund marketed by Spanish bank Santander which invested indirectly with Mr Madoff.

The case, brought by Florida law firm Hanzman Gilbert, alleges that PwC in Dublin "failed to perform its annual audits of the financial statements and financial condition of the Optimal Fund . . . in accordance with professional standards applicable to those audits".

PwC's Dublin office yesterday said it does not comment on client matters, but a spokeswoman added the firm "always complies with professional standards and it does not believe there is any basis for the claim".

PwC has been named in the suit even though it is in no way directly linked with the Madoff fraud or even with decisions made by companies that invested indirectly with him.


Facing a slew of lawsuits, Santander said this week it would offer a €1.38bn compensation package to private clients affected by the Madoff fraud.

The package will take the form of preferred shares in Santander being issued to affected parties, with the provision that they forego any legal action against the institution and maintain Santander as their "preferred" bank as long as the shares remain in circulation.

However, while those shares will carry a 2pc annual yield, Santander is offering no guarantee that it will buy back the shares in the future. There is reportedly a 10-year call option on the shares that Santander won't be obliged to exercise.

The lawyer pursuing the case, Michael Hanzman, was not contactable for comment.

The complaint, seen by the Irish Independent, makes allegations of "professional negligence" against PwC's Dublin office, saying PwC "expected and intended" the shareholder investors in Optimal Multiadvisors and Optimal Strategic US Equity, "to rely on the thoroughness, accuracy, integrity, independence, and overall professional calibre of its audits".

Two Irish units of HSBC -- HSBC Securities Services and HSBC Institutional Trust Services -- have also been named in the suit. But the units simply acted as custodians for funds and had no links with investment decisions made by Santander or its investment funds.

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