Bank files $3bn lawsuit against PwC for failing to warn against huge fraud

Ukraine’s largest lender PrivatBank said Monday it had filed a $3bn lawsuit against PwC, claiming the auditor failed to call attention to “the huge fraud” plaguing the bank for years.

PrivatBank was nationalised in 2016 after authorities blamed billionaire Igor Kolomoyskiy and other bank owners for issuing bad loans to cronies and having insufficient capital to stay afloat.

The lawsuit was filed against Cypriot and Ukrainian subsidiaries of the global auditing firm for alleged breaches of their duties and auditing responsibilities between 2013 and 2015, the bank said.

It was filed last Friday at a Cypriot court, it said.

PrivatBank CEO Petr Krumphanzl accused PwC of failing to identify “huge fraud within the bank over many years which resulted in virtually the entire corporate loan book of the bank being non-performing and without any or any adequate security.”

There was no immediate comment from PwC.

PrivatBank — the nationalisation of which was welcomed by the West — holds more than a third of Ukraine’s deposits.

The Ukrainian authorities last year removed PwC from a list of firms approved to audit the country’s banks as punishment for its alleged failure to expose the long-running fraud at PrivatBank.

Ukraine’s central bank welcomed the lawsuit.

“This will be an important step in the recovery of PrivatBank, helping to ensure that historical failings at the bank are resolved properly and transparently,” it said in a statement.

Last December, Ukraine’s finance ministry said the authorities had spent nearly 140 billion hryvnyas (around $5 billion) on recapitalising PrivatBank to cover the losses caused by the withdrawal of money from the lender and poorly-secured loans handed out before nationalisation.

The same month, a London court froze the assets of Kolomoyskiy, Ukraine’s second-richest man worth $1.3 billion according to Forbes’ 2016 ratings.

The bank said at the time it was seeking to recover more than $2.5 billion through the legal proceedings.

Credit: AFP