PwC took bribes?

• Tweet

• Tweet

Reports coming out of India suggest that at least two PwC partners took bribes as part of the Satyam fiasco:

According to Crime Investigation Department (CID) sources, Satyam founder B Ramalinga Raju and former chief financial officer (CFO) Vadlamani Srinivas confessed that the auditors of PwC were aware of the fraud and very much involved in executing it.

“Five banks, including HDFC Bank and BNP Paribas, replied to our queries saying that the reconciliation statements of the fixed deposits shown by Satyam Computers at auditing were not issued by them,” a CID officer, who is part of the investigation team, told TOI on Sunday.

According to CID sources, S Gopala Krishnan, who was the auditor for Satyam Computers on behalf of Price Waterhouse between 2000-2001 and 2006-2007, and Srinivas Talluri, the auditor for 2007-2008 fiscal, were well aware of the fraud.

“The auditors falsified accounts,” the CID officer said.

During the grilling by CID officials, Rajus and their CFO V Srinivas reportedly told their interrogators that they had paid handsomely for manipulation of accounts.

and…

Two senior auditors of PricewaterhouseCoopers today confessed that they had received heavy amounts to deliberately overlook the fudging process in Satyam at the behest of its former chairman B Ramalinga Raju.

A top official participating in the Satyam probe told The Statesman: “It is a legal obligation of the auditors to scrutinise books of accounts and certify their correctness. But they failed in their duties under criminal negligence. They were part of the fudging process”.

“According to the accounting protocol, we should not have approved the books. But we colluded and approved the figures. We were paid heavy amounts by Ramalinga Raju”, PwC’s in-charge of Hyderabad office Mr S Gopalakrishnan reportedly said in his confessional statement. This was corroborated by Mr T Srinivas.

“They also, intentionally, omitted to verify and scrutinise documents and thereby helped in committing a brazen fraud with the Raju brothers and other directors,” the source said.

They also admitted they knew there was no money in the company for a very long time and that there were no fixed deposits as claimed by Raju, the source added.

It must be said that none of these allegations have been proved in a court of law so remain just that – allegations. Even so, the fact PwC partners are reported as accepting their role in the scandal implies only one thing: bribery at the highest levels of the Indian firm. that’s the sort of thing that attracts unwelcome attention right across the firm because if senior partners can’t be trusted, then who else?

My initial reaction was one of skepticism. How could two qualified accountants, working at the highest level of a global brand leader be so crazy as to risk the firm and their future for what must have been a modest bribe? But then I’ve seen far less involved and the same self destructive mentality take people down.

What next? Regardless of the legal outcome, these admissions cast a long shadow over PwC Global. It must now be patently obvious that PwC has no control over its associates and affiliates. It cannot therefore be reasonably described as a global firm. More worrying – what does it say about other territories where PwC trades.

During a conversation with Francine McKenna, she made the point: “PwC is a three strike business. Yukos in Russia, Japan and now India. Where else do they have issues? Is anyone asking what’s going on in south east asia…places like Vietnam and Cambodia.” I’m not convinced anyone cares about those countries but China? What about South American territories like Brazil, Chile, Mexico? Is PwC operating to standards that stand scrutiny in those places?

When the Satyam fiasco first emerged, I was confused. It didn’t make sense that $1 billion could go ‘missing’ at the behest of one individual. Now it emerges there are many players involved. We are far from bottoming the extent of this corruption.

And before anyone gets too prescient about where to point the finger: it is clear the Indian police are focusing attention on parties immediately surrounding the company as a way of playing judge and jury to the parties THEY think are primarily responsible. But what about ICAI? PCAOB? Indian internal regulatory bodies? Are they innocent in all this? I don’t think so. As far as I am concerned this is but one more example of laxity in governance.

By the time this story plays out, there are few who will come out smelling of roses.

In the meantime, the whiff of bribery is something PwC needs to manage. Right now, its global PR machine is frozen. If it carries on as it is, then it will make Enron look like a mild aberration.

Any professional following this in the UK must be appalled. How could a global brand get itself into so much of a mess and expect the remainder of the profession to pretend it’s not happening? It’s a professional disgrace at every level for which there can be no justification.

Related articles by Zemanta

• Indian Executive Is Said to Have Siphoned Cash
• ‘Indian Enron’ could spell trouble for PwC
• India Tries to Save Jobs After Satyam Scandal
• Inquiry launched in PWC’s auditing of Satyam’s accounts

Tagged as: Enron, Francine McKenna, pricewaterhouse india, Satyam Computer Services