The firm has been embroiled in a number of corruption controversies and major criminal investigations as well as tax evasion and avoidance scandals. It has even aided war criminals in evading financial sanctions. PwC has also often performed faulty audits, vouching for the good financial health of companies without following basic auditing standards.
In 1989, the United States Supreme Court held that Price Waterhouse must prove by a preponderance of the evidence that the decision regarding Ann Hopkins's employment would have been the same if sex discrimination had not occurred. The accounting firm failed to prove that the same decision to postpone Hopkins's promotion to the partnership would have still been made in the absence of sex discrimination, and therefore, the employment decision constituted sex discrimination under Title VII of the Civil Rights Act of 1964. The significance of the Supreme Court's ruling was twofold. First, it established that gender stereotyping is actionable as sex discrimination. Second, it established the mixed-motive framework as an evidentiary framework for proving discrimination under a disparate treatment theory even when lawful reasons for the adverse employment action are also present. Hopkins's candidacy for partnership had been put on indefinite hold. She eventually resigned and sued the company for occupational sexism, arguing that her lack of promotion came after pressure to walk, talk, dress, and act more "femininely."
In 1990, a Federal district judge in Washington ordered the firm to make Hopkins a partner. It was the first time in which a court awarded partnership in a professional company as a remedy for sexual or race-based discrimination.
Following the suit, the firm received media attention due to its discriminatory labor practices towards males as well.
In 2014, it came to light that PwC had received $55 million from Caterpillar Inc. to develop a tax avoidance scheme. According to a US Senate investigation, PwC had helped Caterpillar Inc. drastically reduce its taxes for more than a decade.
Profits worth $8 billion were shifted from the United States to Switzerland, allegedly enabling savings of more than $2.4 billion in US taxes over that period. In Switzerland, the profits were taxed at just 4%.
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A PricewaterhouseCoopers managing director involved in designing the tax savings plan wrote at the time to a PwC partner: “We’ll all be retired when this … comes up on audit.”
American International Group Inc.
In 2005, BusinessWeek reported that PwC was American International Group Inc.'s auditor through AIG's years of "questionable dealings" and accounting improprieties. AIG on 30 March 2005, said that deals with a Barbados-based insurance company, for instance, may have been incorrectly accounted for over the past 14 years, because an AIG-affiliated company may have been secretly covering that insurer's losses.
BusinessWeek said that PwC also appeared to have "dropped the ball" on the deals between AIG and Berkshire Hathaway Inc.'s General Re Corp. General Re transferred $500 million in anticipated claims and premiums to AIG. BusinessWeek asked: "Did the auditor do its job by verifying that AIG was assuming risk on claims beyond the $500 million, thus allowing AIG to account for the deal as insurance? That's Accounting 101 in any reinsurance transaction."
According to a memo published by Business Insider, witnesses wondered how PwC was signing off on the accounts for both AIG and Goldman Sachs when they were using different valuation methods for the swaps contracts (and therefore booked different values for them in their accounts).
ChuoAoyama suspension
ChuoAoyama Audit Corporation (中央青山監査法人, Chūō-Aoyama Kansa Hōjin) was the Japanese affiliate of assurance service of PwC from April 2000 to 2006. In May 2006, the Financial Services Agency of Japan suspended ChuoAoyama from provision of some statutory auditing services for two months following the collapse of cosmetics company Kanebo, of which three of the partners were found assisting with accounting fraud for hiding deficits of about $1.9 billion over the course of five years.
The accountants got suspended prison terms up to 18 months from the Tokyo District Court after the judge deemed them to have played a "passive role" in the crime. The suspension was the first-ever imposed on a major accounting firm in the country. Many of the firm's largest clients were forced to find replacement auditors before the suspension began that July.
Shortly after the suspension of ChuoAoyama, PwC acted quickly to stem any possible client attrition as a result of the scandal. It set up the PricewaterhouseCoopers Aarata, and some of ChuoAoyama's accountants and most of ChuoAoyama's clients moved to the new firm. ChuoAoyama resumed operations on 1 September 2006, under the Misuzu name. However, by this point the two firms combined had 30% fewer clients than did ChuoAoyama prior to its suspension. Misuzu was dissolved in July 2007.
Tyco settlement
In July 2007, PwC agreed to pay US$229 million to settle a class-action lawsuit brought by shareholders of Tyco International Ltd. over a multibillion-dollar accounting fraud. The chief executive and chief financial officer of Tyco were found guilty of looting $600 million from the company.
Indian companies scandals
In 2007, India's accounting standards agency ICAI found partners of PwC guilty of professional negligence in under-providing for nonperforming assets of the now-defunct Global Trust Bank. This led to the RBI banning PwC from auditing any financial company for more than a year. PwC was also associated with the accounting scandal at the India-based DSQ Software, which collapsed in 2003.
In January 2009, PwC was criticised, along with the promoters of Satyam, an Indian IT firm listed on the NASDAQ, in a $1.5 billion fraud. PwC wrote a letter to the board of directors of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman and subsequently withdrew its audit opinions.
PwC's US arm "was the reviewer for the U.S. filings for Satyam". Consequently, lawsuits were filed in the US with PwC as a defendant. Two partners of PricewaterhouseCoopers, Srinivas Talluri and Subramani Gopalakrishnan, were charged by India's Central Bureau of Investigation in connection with the Satyam scandal. After the scandal broke out, Subramani Gopalakrishnan retired from the firm after reaching mandatory retirement age, while Talluri remained on suspension from the firm.
Following the Satyam scandal, the Mumbai-based Small Investor Grievances Association (SIGA) requested the Indian stock market regulator SEBI to ban PwC permanently and seize its assets in India alleging more scandals like "Ketan Parekh stock manipulations."
In 2015, PwC India said they were disappointed with court judgement of the case saying, "As we have said many times, there has never been any evidence presented that either of our former partners S Gopalakrishnan or Srinivas Talluri were involved in or were aware of the management-led fraud at Satyam. We understand that Gopal and Talluri are considering filing an appeal against this verdict."
In 2018, PwC was banned by India's securities regulator from providing auditing services to public-listed companies for 2 years, and PwC was fined $2 million in addition to the suspension. In September 2019, this ban was overruled by the securities appellate tribunal stating that there was no evidence of collusion of PwC in the scam. The tribunal also stated that SEBI had no jurisdiction over audit firms and only ICAI could issue such an order.
Association with the hiring of a person accused in gold smuggling case
PwC, which provides consulting service to the Kerala government's Department of Information Technology and its Space Park project, has been criticised for appointing Ms. Swapna Suresh, who is accused in a case of smuggling gold in a diplomatic bag. Following an investigation, the Kerala government decided to terminate the consultancy services of PwC for the proposed Space Park project in Thiruvananthapuram. PwC sub-contracted the resource from a vendor, Vision Technologies, but the government considers that the primary liability is on PwC for recruiting Swapna Suresh.
Even before these events, the opening of the PwC office in Kerala secretariat had attracted serious criticism from the opposition party. Following this, PwC issued clarification on their hiring of Ms. Swapna Suresh by stating that she was hired based on a background verification report from past employers as well as a criminal record verification at the time. In February 2022, the state government of Kerala wrote to PwC in order to seek the refund of INR 16 Lacs paid in salary to Swapna Suresh. In April 2022, the company responded that it can't repay the amount.
Yukos prosecutions
Yukos was a Russian oil and gas company that was the target of politically motivated prosecutions by Russian authorities. The company's assets were sold for alleged unpaid taxes and it was declared bankrupt. PwC's audits were the foundation for the firm's defense in a series of continuing trials against former chief executive, Mikhail Khodorkovsky, and the former majority shareholder, Platon Lebedev. The Russian authorities then went after PwC. In March 2007, police raided PwC's Moscow offices, confiscating documents related to Yukos and charging and convicting PwC of failing to pay 243 million rubles, or $9.4 million, in taxes. PwC withdrew its Yukos audits and less than two weeks later authorities cleared PwC of any wrongdoing in regard to its audit.
In 2010, Joe Nocera in the New York Times wrote, "In 2007, with the prospect of parole on the horizon, the same prosecutors—with what appears to be the complicity of PricewaterhouseCoopers, Yukos's longtime accounting firm—indicted the two men (Mikhail B. Khodorkovsky and Platon Lebedev), again, bringing a new round of Kafkaesque charges."
In 2010, it was revealed that the Russian government placed pressure on PwC to withdraw audits.
A cable from the U.S. embassy in Moscow stated that the trial was politically motivated and that a deposition in a U.S. court by PricewaterhouseCoopers may show that PwC was pressured by the Russian government to withdraw its prior Yukos audits. An embassy source noted that "If the audits were properly withdrawn, this will be a 'black mark' for the defense; if not, it could help the defense, but would greatly tarnish PWC's international reputation."
Transneft Russia case
Upon the completion of the construction of the ESPO (East Siberia-Pacific Ocean) pipeline by Transneft in December 2010, an official report of the Audit Chamber of the Russian Federation suggested that $4 billion was stolen by Transneft insiders. One Federation Council Speaker, Sergei Mironov, called for an investigation. Alexei Navalny, a minority Transneft shareholder and lawyer, accused the company of wrongdoing in his personal blog, and criticized PwC, Transneft's auditor, of ignoring his warnings. PwC denied wrongdoing, stating that, "We believe there are absolutely no grounds for such allegations, and we stand behind our work for OAO AK Transneft."
Northern Rock
In 2007, PwC was criticised by the Treasury Select Committee of the Parliament of the United Kingdom for helping Northern Rock, a client of the firm, to sell its mortgage assets while also acting as its auditor. In 2011, a House of Lords inquiry criticized PwC for not drawing attention to the risks in the business model followed by Northern Rock, which was rescued by the UK government during the 2008 financial crisis.
JP Morgan Securities audit
In 2012, the Accountancy and Actuarial Discipline Board (AADB) of the UK fined PwC a record £1.4m for wrongly reporting to the Financial Services Authority that JP Morgan Securities had complied with client money rules which protects client funds. The accountants neglected to check whether JP Morgan had the correct systems in place and failed to gather sufficient evidence to form opinions on the issue, and as a result, failed to report that JP Morgan failed to hold client money separate from JP Morgan's money. The £1.4m fine was at the time the greatest penalty administered to a professional accountancy firm in the UK.
Water privatisation in Delhi
PwC was found to be unethically favored by the World Bank in a bid to privatize the water distribution system of Delhi, India, an effort that was alleged as corrupt by investigators. When bidding took place, PwC repeatedly failed in each round, and the World Bank in each case pressured PwC to be pushed to the next round and eventually win the bid. The effort at privatization fell through when an investigation was conducted by Arvind Kejriwal and the non-governmental organization (NGO) Parivartan in 2005.
After submitting a Right to Information (RTI) request, Parivartan received 9000 pages of correspondence and consultation with the World Bank, where it was revealed that the privatization of Delhi's water supply would provide salaries of $25,000 a month to four administrators of each of the 21 water zones, which amounted to more than $25 million per year, increasing the budget by more than 60% and water taxes 9 times.
The Delhi Jal Board (DJB), which administers the water system of Delhi, was first approached by Parivartan in November 2004, following a report by the newspaper The Asian Age, where the scheme was revealed to the public for the first time. The DJB denied the existence of the project, but after an appeal, the RTI request was granted. The documents revealed that the project began in 1998, in complete secrecy within the DJB administration.
The DJB approached the World Bank for a loan to improve the water system, which it approved, and the effort began with a $2.5 million consultation loan. The Delhi government could have easily provided the money, and the interest rate of 12% that was to be loaned by the World Bank could have been raised on capital markets for 6%. Following the consultation, 35 multinational companies bid, of which six were to be shortlisted. When PwC was in 10th place, the World Bank said that at least one company should be from a developing country, and since PwC made the bid from its Kolkata office, it was dubbed an "Indian" company, and its rank was raised to 6th.
When PwC failed in the second round, the World Bank pressured the DJB to start over with a fresh round of bidding. Only one company succeeded in the new round that was not PwC, and the World Bank had the lowest marks from an evaluator thrown out. The contract was awarded to PwC in 2001. Following the investigation by Parivartan, a campaign was waged by Kejriwal, Aruna Roy, and other activists across Delhi and the DJB withdrew the loan application to the World Bank.
Cattles
In 2013, Cattles plc brought a legal action against PwC in the UK in respect of 2006 and 2007 audits, claiming that PwC had failed to carry out adequate investigations. Cattles, a UK consumer finance company, later discovered control weaknesses which caused its loan book to be materially overstated in its balance sheet; having been listed as a FTSE250 company, it subsequently lost its listing. PwC disputed this legal claim. The claim was settled out of court on undisclosed terms.
The Financial Reporting Council (FRC) issued a fine of £2.3m on PwC and ordered the firm to pay £750,000 costs following their investigation of the 2007 audits of Cattles and its principal trading subsidiary. PwC admitted their "conduct fell significantly short of the standards reasonably to be expected of a member firm" in respect of the 2007 financial statements. The FRC said that PwC had insufficient audit evidence as to the adequacy of loan loss provisions.
Quinn Insurance
In 2015, PwC Ireland was sued by the joint administrators of Quinn Insurance Limited (QIL) for €1bn. Having been audited by PwC for the years 2005 to 2008, QIL went into administration in 2010. The administrators alleged that PwC should have identified a material understatement of QIL's provisions for claims.
Connaught plc
Connaught plc, a UK former FTSE 250 Index outsourcing company operating in property maintenance for the social housing and public sector, was put into administration in 2010 after reporting material losses. In 2017, the Financial Reporting Council (FRC) severely reprimanded PwC and its audit partner following an investigation of their conduct in respect of the 2009 audit of Connaught. PwC was fined a record £5 million plus costs.
Tesco
In 2014, Tesco, a UK retailer, announced that it had overstated profits by £263m by misreporting discounts with suppliers. The Financial Reporting Council started an investigation into accounting practices at Tesco and into the conduct of PwC in carrying out its audits in 2012, 2013 and 2014. Two members of Tesco's Audit Committee, responsible for monitoring Tesco's relationship with its auditors, had themselves previously worked for PwC, including its chairman, Ken Hanna; he later stood down.
In 2015 PwC were replaced as auditors of Tesco, ending a 32-year engagement, following a tender process to which they did not participate. In June 2017, the Financial Reporting Council said there was no "realistic prospect" that a tribunal of the UK's accountancy watchdog would rule against the auditor PwC concerning its involvement in Tesco's 2014 case.
Bank of Tokyo-Mitsubishi UFJ
In 2014, The Bank of Tokyo-Mitsubishi UFJ was investigated by New York banking regulators over its role in routing payments for Iranian customers through its New York branch in violation of U.S. sanctions. It was found that PwC had altered an investigation report on the issue; PwC itself was fined $25 million in relation to the matter.
Luxembourg Leaks
The firm helped multinational companies obtain 548 legal tax rulings in Luxembourg between 2002 and 2010. The rulings provided written assurance that the multinational companies' tax-saving plans would be seen favorably by the Luxembourg authorities. The companies saved billions of dollars in taxes with these arrangements. Some firms paid less than one percent tax on the profits they shifted to Luxembourg. Employees or former employees of PwC provided documentation of the rulings to journalists. In 2013 and 2014, PwC UK's head of tax was called before the UK's public accounts committee and was questioned about lying regarding the marketing of these tax avoidance schemes. He told the committee the financing, investments, and tax structure is legal and well known to the British government. "If you want to change the Lux tax regime, the politicians could change the Lux tax regime."
The disclosures attracted international attention and comment about tax avoidance schemes in Luxembourg and other tax havens. The revelations later led to a series of EU-wide measures aimed at regulating tax avoidance schemes and tax probes into several EU companies. In 2016, PwC initiated charges against the two whistleblowers that revealed the LuxLeaks tax controversy, and they were convicted and sentenced with suspended prison sentences and fined. In March 2017, a Luxembourg appeals court upheld the convictions of the two whistleblowers, but with reduced sentences.
Petrobras Brazil
In 2015, the Bill & Melinda Gates Foundation of Microsoft founder Bill Gates sued oil company Petrobras and accounting firm PwC's Brazil arm over investment losses due to corruption at the Brazilian oil company. The filings also alleged that PwC's Brazil affiliate, PricewaterhouseCoopers Auditores Independentes, played a significant role by attesting to Petrobras financial statements and ignoring warnings.
