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May 12, 2010

Icelandic bank sues PwC for fraud cover up

The board appointed to wind up Iceland’s Glitnir Bank is taking legal action against the bank’s former auditors PricewaterhouseCoopers Iceland (PwC) for allegedly facilitating and helping conceal fraudulent transactions engineered by a principal shareholder.

The lawsuit, filed in the New York Supreme Court on 11 May, alleged Jón Ásgeir Jóhannesson led a group of seven businessmen who drained more than $2bn from Glitnir Bank, ultimately leading to its October 2008 collapse.

One main accusation against PwC is that the firm helped Jóhannesson and his associates raise $1bn from New York investors without revealing the truth about the bank’s financial exposure and losses.

“The individual defendants could not have succeeded in their conspiracy to loot Glitnir without the complicity of outside auditors at PricewaterhouseCoopers,” the Glitnir complaint stated.

The Glitnir board claimed PwC was “intimately familiar” with Glitnir’s related party exposure procedures and reviewed and signed off on Glitnir financial statements, which grossly misrepresented the related party exposure.

Last October, Icelandic police raided the Reykjavik offices of KPMG and PwC as part of an investigation into alleged criminal activity at three collapsed Icelandic banks

PwC Iceland has not responded to International Accounting Bulletin requests for comment at the time of publish.

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