PwC has been ordered by a federal judge in Manhattan to face the $1bn lawsuit over claims its advice was "a substantial cause" in the October 2011 bankruptcy of former New Jersey Governor Jon Corzine’s brokerage, MF Global Holdings.
Despite dismissing claims of breach of contract and unjust enrichment also claimed against the accountancy firm, according to Reuters the judge yesterday said the line of causation between its advice and MF Global’s losses "gives rise to a plausible claim that PwC proximately caused harm" to the company.
According to US District judge Victor Marrero, the advice given by PwC on the "repurchase-to-maturity" transactions used by Corzine to buy European sovereign debt to the value of $6.3bn impacted MF Global’s strategy implementation, contributing to the company’s 2011 losses.
MF Global sued PwC on 28 March this year for professional malpractice, accusing the accounting advice the firm gave of being "flatly erroneous".
Marrero conceded factors such as the way Corzine’s strategy was implemented by MF Global employees might have been a concurrent, significant factor in the company’s losses, but determined the decision about who was liable should be put to a jury.
PwC spokesperson Caroline Nolan said the firm "respectfully disagrees" with the decision to continue the case and described MF Global’s treatment of the repurchase-to-maturity transactions as consistent with generally accepted accounting principles, according to Reuters.
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