The Blame Game: MF Global & PwC’s $3B Malpractice Lawsuit

Think auditors are overly meticulous and have an eye for catching mistakes? Well, after MF Global’s scandal with PwC… think again. We are now in the second week of the high-profile case and there is no mistaking that former commodities brokerage house, MF Global’s collapse was almost entirely former CEO Jon Corzine’s production. Six years ago, the ex-Goldman Sachs partner and New Jersey Governor admitted to Congress that he was behind a strategy of buying more than $6 billion in European sovereign debt to try to diversify MF Global. That strategy ended with the company’s bankruptcy in 2011.

MF Global is hoping to shift the blame to PwC for allowing the company to make this decision and are facing off against PwC in a $3 billion malpractice lawsuit. MF Global is arguing that its creditors owed $1 billion, including hedge funds, which brought its discounted debt to fail –  not only because of Corzine’s decision on European bonds, but also because of PwC’s lack of accounting treatment for those bonds.

In April 2015, PwC reached a separate $65 million settlement with MF Global investors, but denied wrongdoing. Meanwhile, Corzine has not been accused of intentional misconduct, but in January reached a $5 million civil settlement with the U.S. Commodity Futures Trading Commission.

A former employee spoke to the Financial Times stating that MF Global was “an accident waiting to happen. No systems, no risk control frameworks, no IT!”

The expected five-week trial is the last piece of litigation to recover money for MF Global creditors. Are the auditors to blame here? Only time will tell.

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