PwC faces €1bn lawsuit over Quinn Insurance
Firm rejects administrators' audit claim
THE joint administrators of Quinn Insurance are suing PriceWaterhouseCoopers for around €1bn over PWC's alleged negligent auditing of the company's accounts over several years.
It is the largest ever action taken against an Irish auditor and an award at this level would smash all previous claims for compensation in the State.
The case will be closely watched by business because it is likely to establish where auditors' responsibilities lie when they look at a company's accounts.
In a strongly worded statement yesterday, PWC denied the accusations and hit back at the administrators.
"The affidavit, accompanying the application, contains factual inaccuracies, misrepresentations of the facts and assertions with which we fundamentally disagree. We stand by the quality of our audit work and we will vigorously defend these proceedings," it said.
Any damages recovered in the case will be used to partly or fully repay the State-backed Insurance Compensation Fund. The fund may have to shell out as much as €1.65bn to meet the claims of Quinn Insurance policy holders.
About €1.1bn has been paid out of the fund to date, forcing the Government to impose a 2pc levy on all non-life insurance policies sold in Ireland.
Among a series of claims, the administrators allege PWC failed between 2005 and 2008 to notify either the Quinn Insurance board or the financial regulatory authorities of the company's failure to have the level of reserves required for non-life insurance companies.
They claim there was some €1.8bn reserves in 2010 and further provision of €800m should have been made.
It is also claimed PWC failed to note in Quinn Insurance's audited accounts that the insurer had authorised a number of its subsidiaries to give guarantees over debts from other companies in the Quinn Group. The guarantees extended to €1.29bn by 2007.
The administrators claim Quinn Insurance was insolvent for a significant time before it was placed in administration in 2010 when an independent non-executive director notified the financial regulator of the guarantees.
The case will be vigorously defended, PWC's lawyers told Judge Peter Kelly when consenting to have the case fast-tracked in the Commercial Court.
The judge said, while there was a delay since the initial proceedings were issued last March, a sound explanation had been provided of the work involved to bring matters to this stage.
In an affidavit, Michael McAteer, who with Paul McCann was appointed joint administrator of Quinn Insurance in March 2010 by the High Court on the application of the Financial Regulator, said the scale of the under-reserving, while difficult to quantify, was "so significant" the administrators had had to set aside €800m to cater for deficiencies.
Had PWC properly performed its duties, Quinn Insurance's true financial position would have been brought sooner to the attention of its board, including its non-executive members, and the financial regulators, it is claimed.