PwC sued by liquidators of China Evergrande for $8.4B
What's the story
The liquidators of China Evergrande, a major Chinese property developer that went bankrupt, are suing accounting firm PricewaterhouseCoopers (PwC) for CNY 57 billion ($8.4 billion). The claim was made against PwC International, PwC Hong Kong and its mainland Chinese entity in a Hong Kong court today. However, no decision has been made on the claims yet.
Market crisis
Evergrande defaulted in 2021
China Evergrande, once one of the country's largest real estate developers, defaulted in 2021. With over $300 billion in liabilities, it became the world's most indebted developer. The company's downfall triggered a liquidity crisis in China's property sector, which has been struggling with falling sales and prices ever since. The market is yet to fully recover from this setback.
Lawsuit
Liquidators sue PwC for alleged 'negligence'
After a Hong Kong judge ordered China Evergrande's liquidation in early 2024, its court-appointed liquidators sued PwC for alleged "negligence" in its auditing work. The move was part of their efforts to recover as much as possible for creditors. Last month, Hong Kong regulators revealed that PwC had agreed to pay HK$1.3 billion ($166 million) in fines and compensation over its role in auditing Evergrande's financial statements prior to the company's collapse.
Audit failures
PwC fined over auditing failures
PwC admitted last month that its work on the Evergrande audits "fell well below our high expectations and the expectations of our stakeholders." This came after mainland Chinese authorities fined PwC CNY 441 million ($62 million) for its role in the Evergrande audits. The Chinese developer was also found to have inflated its revenues by some $80 billion in its 2019 and 2020 financial results.