By Pam Martens and Russ Martens: February 28, 2017
PwC, formerly known as PricewaterhouseCoopers, is one of the Big Four accounting firms created in 1998 from the merger of Price Waterhouse and Coopers & Lybrand. Its namesakes are more than a century old. Unfortunately, PwC will henceforth be known as the accounting firm that provided presenters Warren Beatty and Faye Dunaway with the wrong red envelope at Sunday night’s Oscars. That mistake created a chaotic scene where two producers of the film “La La Land” were initially allowed to give speeches on stage for Best Film, then stunned with the news that “Moonlight” had actually won the award. At one point, producers and casts of both films stood in dazed confusion on the stage.
According to the official report thus far, a PwC partner, Brian Cullinan, mistakenly handed the Best Actress award envelope (Emma Stone for “La La Land”) to Beatty, instead of the envelope for Best Film, leading to Dunaway announcing it as Best Film.
In a YouTube video (see below) made by PwC to celebrate its long history of tabulating votes for the Oscars, the words “Integrity” and “Accuracy” flash upon the screen. But in multiple current court actions, PwC’s integrity and accuracy are being challenged in very serious ways.
One court action is close to the home of the Oscars. The Los Angeles City Attorney, Michael N. Feuer, brought an action against PwC in 2015 on behalf of the Los Angeles Department of Water and Power (LADWP). It initially alleged that when PwC submitted a bid proposal to update the forty year old billing and customer care system for the LADWP it “marked the beginning of a pattern of intentional deception, breach of commitments, and an almost endless litany of attempts to deny or cover up those acts or omissions by PwC that is virtually breathtaking in both its scope and its audacity.”
Because of PwC’s intentional misrepresentations and breaches of contract, according to the lawsuit, a chaotic disaster fell upon the public utility: “…the Department was not able to bill some of its customers for more than 17 months, including more than 40,000 of its 400,000 commercial customers, resulting in an $11 million loss in revenue for each month during this period. Moreover, for weeks, LADWP couldn’t bill any of its 1.2 million residential customers at all.” In addition, the complaint goes on, countless LADWP customers were overbilled while others were underbilled, “resulting in an exponential surge in ratepayer complaints, non-payment of bills, and an enormous spike in the aging of accounts receivable.”
And, that wasn’t the worst part of this lawsuit. In June of last year, the Los Angeles City Attorney filed a motion to amend the complaint to include charges that “several senior-ranking PwC Managers” had engaged “in a three-year long conspiracy to defraud the City of Los Angeles and the LADWP by repeatedly submitting intentionally falsified PwC time records in a manner not able to be detected by LADWP to obtain payments for work that PwC never performed from 2011 through at least 2013.” Payments for the overbilling were then used, according to the City Attorney, “to reimburse their subcontractor for payments made for the services of escorts and prostitutes, lavish hotel stays, two bachelor parties and thousands of dollars for ‘bottle service’ liquor at Las Vegas hotels and clubs in July 2011 and May 2013.”
This is not the first time that PwC has been charged with overbilling. In 2005, PwC paid $41.9 million to settle charges by the U.S. government that it had overbilled it for its travel expenses.
Then there is the titillating, multi-billion-dollar accounting malpractice case against PwC set to go to trial next Monday. After the fiasco at the Oscars on Sunday evening, the lawyers representing MF Global’s administrator are likely feeling a whole lot more confidant that their $3 billion case against PwC will settle before a jury is ever seated next week. MF Global is the commodity firm that collapsed in 2011 after making wild gambles in European sovereign debt. Jon Corzine, a former co-head of Goldman Sachs and former Governor and U.S. Senator from New Jersey, sat at the helm of the firm when the reckless financial trades were made. The fact that $1.6 billion of customer funds went missing resulted in multiple hearings before Congress. (Read our in-depth report on the matter.) As we reported in 2012, the MF Global collapse had all the earmarks of a financial system still out of control, even after the greatest taxpayer bailout in U.S. history in 2008 through 2010. We wrote:
“Only on Wall Street can you bankrupt a company; misplace $1.6 billion of customers’ money; lose 75 percent of shareholders’ money in two weeks; speed dial a high priced criminal attorney and get a court to authorize the payment of your multi-million dollar legal tab from the failed company’s insurance policies; have regulators waive your requirements to take licensing exams required to work in the securities and commodities industry; have your Board of Directors waive your loyalty to the firm; run a bucket shop out of the UK; and still have the word ‘Honorable’ affixed to your name in a Congressional investigations hearing.”
The same logic could be applied to PwC. Only in America’s current rudderless system of accountability and celebrity-obsessed society could PwC be facing all of these serious allegations but the charge that saturates newspapers and network television involves a mistaken Oscar award.