Oscars Blunder: PwC to pay a heavier price
Global accounting firm PricewaterhouseCoopers (PwC) could pay a heavier price for faux-pas at the Oscars if a court decides at a malpractice trial next week that the firm has a history of making blunders. MF Global Holdings, which filed for bankruptcy in 2011 after losing $6.3 billion on European sovereign debt, sued PwC for $1 billion claiming that accounting negligence led to their downfall.
On February 27, 2017, two PwC accountants, responsible for envelopes with names of winners, had handed over the wrong envelope for the 'best picture' award. In a blunder televised worldwide, producers from "La La Land" accepted the award before everyone realized it belonged to "Moonlight".
PwC is accused of contributing to the 2011 collapse of MF Global, the brokerage firm then led by former New Jersey Governor Jon Corzine. The court had delayed the case last month, expecting the parties to settle. After they couldn't, the trial has been scheduled for March 6. PwC argues that MF Global is wrongly passing a strategy failure designed by Corzine.
On October 25, 2011 MF Global reported a $191.6 million quarterly loss due to trading on European government bonds. In response, rating agencies Moody's and Fitch cut the company's credit rankings to zero. Analysts say that it was a fatal decision that Corzine was both CEO and head trader - functions that should be separate. The responsibilities of the chief risk officer were insufficient.
After Corzine assumed the leadership role in MF Global 2010, he led the firm in making bets on a European sovereign debt that needs finance through a bond repurchase arrangement called "Repurchase To Maturity" (RTM). MF Global claims that PwC had approved the faulty RTM agreement as negligently as it handled the Oscar event. This decision failed and MF Global announced bankruptcy in 2011.
PwC defends its position saying accounting was accurate and MF Global is wrongly trying to accuse them of a strategy failure originally designed by Corzine. PwC dubbed the case as an attempt to force the accounting firm to cough up for MF Global's blunders. PwC has already said that the two accountants won't be employed to work on the Oscars again.
