Price Watergate-3

"Indian police arrested two partners of an Indian arm of accounting giant PricewaterhouseCoopers [PWC] Saturday on charges of criminal conspiracy and cheating in connection with the fraud investigation at Satyam Computer Services Ltd., [[SCSL], according to senior police official A. Siva Narayana. ... Srinivas Talluri and S. Gopalakrishnan, the two partners at [PWC], one of [PWC'] Indian businesses, couldn't be reached for comment Sunday. The men are in judicial custody. ... 'Like everyone else, we were shocked by the massive fraud at Stayam and by the steps undertaken to conceal it,' [PWC] said. ... The firm has offices in nine Indian Cities. [PWC] said that the Indian firm is a member of its international network and is owned by the Indian partners", Jackie Range at the WSJ, 26 January 2009.

"A U.S. judge issued a ruling in the Parmalat securities litigation that could worry large accounting firms with offices in many countries. ... At issue in Tuesday's ruling, by U.S. District Judge Lewis Kaplan of New York, was whether Deloitte Touche Tomahatsu potentially could be held liable for an allegedly defective Parmalat audit by its Italian member firm. ... 'This is huge,' says Stuart Grant, counsel for people who bought Parmalat shares. 'Judge Kaplan has finally made the law reflect reality. These accounting firms sell themselves as worldwide, seamless organizations. Now they are going to be held responsible in the same fashion'," Nathan Koppel at the WSJ, 29 January 2009.

"The Satyam case is just the latest in a sequence of events which have begged the age-old question: 'Where were the auditors?' ... First, BDO. A case next month will determine whether BDO International, the umbrella organisation that links all the BDO firms, is resposible for BDO Seidman, the US arm of the firm. ... If BDOI is brought in, this could open the floodgates for all sorts of litigation against the big accounting firms, which because they face unlimited liability in most countries, have sought to present a single global brand but to distance themselves from each other when trouble looms. ... 'It makes sense, that they want to have a brand just like IBM or Mercedes. But when they get sued, they say "that's not us, it's someone elase". No-one else gets to do that, why should accounting firms be able to?' says Steven Thomas, the lawyer leading the case against BDO. ... We also know that the PCAOB, the US audit regulator, was in India last spring and, as part of its inspections of US registered firms, looked at the Satyam files of PWC and raised concerns about the file with the firm", my emphasis, Jennifer Hughes at the FT, 29 January 2009.

"Common complaints about India's disclosure regime include the absence of a requirement on companies to file full balance sheets along with quarterly results. The other problems is enforcement. ... And almost no serious white collar criminal inIndia has ever served time after sentencing. ... 'Corporate crime in India can't be addressed by more laws or indeed more governance,' says Krishnamurthy Vijayan, executive chairman of JP Morgan Asset Managemant in Mumbai. 'I suspect that rapid and forceful action against the perpetrators is the main answer'," Joe Leahy at the FT, 30 January 2009.

PWC must be incompetant if it was "shocked by the massive fraud". This is a Captain Renault line from Casablanca, 1942. Some day the SEC may put an end to this Big 87654 fiction of being one firm for all purposes except being sued.

Judge Kaplan's ruling is over 30 years late. The SEC should have intervened in the case as should the PCAOB. I read Judge Kaplan's 30-page ruling. It looks good to me, link: http://online.wsj.com/public/resources/documents/parm.pdf.

How nice, the PCAOB "raised concerns". Why believe the PCAOB knows what it's doing? I agree with Thomas, the reform is long overdue: if you use the name PWC, and get sued, all PWC firms get sued. Period. Well Madame Schapiro, how about it?

I agree with Krishnamurthy. Corporate governance is another scam to put to bed.