Big Four accountancy firm PwC is being sued for £63m after accusations it conspired against a former client.
The client in question is Watchstone, an insurance and technology group. They are formerly known as Quindell. The company hired PwC for restructuring advice during the run-up to a takeover by law firm Slater & Gordon in 2015. They accuse the firm of releasing private financial information to a rival during a takeover approach.
Who are Watchstone?
Watchstone are an insurance and technology firm. Formerly known as Quindell, it was a claims management company focusing on motor accidents. Now, however, it focuses on providing black box car insurance to young drivers.
An accounting scandal in 2014 led to the appointment of PwC to review its finances. In 2015, Australian law firm Slater and Gordon acquired the professional services arm of the company. Unfortunately, this ended in disaster with the law firm writing down £450m in the value of the business within a year.
Slater and Gordon sued Watchstone for reach of warranty and fraudulent misrepresentation in 2017. It was revealed at Watchstone (Quindell at the time) misstated their accounts, and that an £80m profit was actually a £375m loss.
Why are Watchstone suing PwC?
The lawsuit claims that PwC breached its contract and confidence. The lawsuit states that it also committed “unlawful means conspiracy” against it.
So, where is the evidence?
The lawsuit essentially centres on an alleged secret meeting between PwC and an adviser working for Slater and Gordon in 2015, a company called Greenhill & Co. PwC were hired by Watchstone to review their finances, and shortly after Watchstone were approached with an offer to by their professional services division.
It was then that Slater and Gordon sought to establish a link between themselves and PwC, without Watchstone knowing. The aim of this was to gain access to the PwC review, though this plan was later abandoned.
However, it is alleged that two executives, one from Greenhill and one from PwC did meet. The PwC executive is alleged to have handed over details about Watchstone’s finances, of which were confidential. The most important aspect of this is that one of the key details was that they would run out of money in mid-2015. As a result of this information, Slater and Gordon paid a lower price for the business.
What have PwC said?
A spokesman has told the Financial Times;
“We deny these allegations and will vigorously defend this claim. It would be inappropriate to comment further on an ongoing legal matter”
Watchstone have declined to comment.
What happens next?
The lawsuit is still in its early days, so there is no telling what will happen next.
This, along with the Wirecard scandal and recent criticism of the Big Four as a whole, will prove a headache for PwC.