The Landsbanki Winding-up Board is suing not only PwC Iceland but also PwC LLP in the UK for damages caused by incorrect and misleading accounting of Landsbanki from mid 2007 until the collapse of Landsbanki in October 2008. The WuB is demanding in total a payment of ISK83bn (almost €490m), $11m and €65m. According to the WuB writ, not yet published but seen by Icelog, PwC LLP in the UK was responsible for Landsbanki’s accounting, which is why not only PwC Iceland is sued but also PwC LLP. Both PwC Iceland and LLP refute all allegations and will defend themselves vigorously.
The WuB two main claim are 1) that PwC incorrectly over-estimated the bank’s own capital – and 2) that PwC used international accounting standards incorrectly thereby allowing the bank to break its own rules, i.a. by not listing loans to related parties, i.e. the bank’s largest shareholders father and son Bjorgolfur Gudmundsson and Bjorgolfur Thor Bjorgolfsson. This enabled the bank to lend to father and son far beyond legal limits. Since lending to related parties was, according to the WuB, not announced in published account, other shareholders were unaware of the situation.
For those who think that the role of accountants in the banking crisis has been mostly ignored this case is an interesting test case. The case will come up in Reykjavik County Court next year.
Updated – in addition:
The relationship between PwC Iceland and Pwc LLP on one hand and Landsbanki was close and extensive and had been for many years. PwC was the auditor of Landsbanki, both in Iceland, the UK and Luxembourg as well as advising Landsbanki on tax, auditing standards and carrying out due diligence for Landsbanki.
PwC has refused to hand over material relating to its Landsbanki auditing to Landsbanki WuB. The Landsbanki WuB brought PwC to court to get access to this material. In 2011 the High Court in Iceland ruled that PwC should hand over the material. When the Landsbanki WuB writ against PwC was served in June 2012 PwC had not yet complied with the ruling of the High Court.
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