The accountancy firm PricewaterhouseCoopers is facing a $2.5bn (£1.7bn) lawsuit that accuses it of “negligent, fraudulent and tortious conduct”.
Amerco Inc, the troubled parent of the truck rental company U-Haul International, yesterday said the legal action against its former auditor outlined “a series of events caused by PwC” that resulted in the need for Amerco to restructure its balance sheet and obtain more than $850m in new financing. The lawsuit charges that PwC's wrong advice, coupled with delays in disclosing the error once it was discovered, triggered a chain of events that placed Amerco in “serious jeopardy”.
Amerco said the delay forced it to postpone filing financial statements with regulators and put the debt-laden company on the brink of being delisted from the Nasdaq exchange in New York. Amerco, which named a new finance chief last week, avoided bankruptcy by reaching an agreement with lenders for a four-year $865.8m credit facility last month.
“They gave us bad advice for seven straight years,” Amerco's general counsel, Gary Klinefelter, told the news agency Reuters. “We're in the business of renting out trucks and trailers, and they're in the business of giving out accounting advice.” But A PwC spokesman said the lawsuit appeared to be an attempt by Amerco's management to shift the blame away from itself.
“The primary responsibility for the accuracy of financial statements lies with the company,” PwC's David Nestor said. “Once it became apparent that there was an error in Amerco's, we worked with them to get their financial statements correct, which is, of course, the important thing.”
The dispute centres around a set of financing vehicles or so-called “special purpose entities”, SPEs, that Amerco set up in the mid-1990s. These were designed to help expand the company's self-storage business but prevent its balance sheet from being weighed down with debt.
Mr Klinefelter said the idea for the SPEs, a term that has gained notoriety since they played a crucial role in the collapse of the energy trader Enron, came from PwC, which advised and reviewed the deals. The company said in the lawsuit that it had been assured by PwC that the SPEs could be excluded from its financial statements under US accounting rules. But last year, after the Enron débâcle put the spotlight on SPEs, PwC re-examined the accounting and realised that Amerco's financial statements had to be restated to include those entities, Amerco said.
Amerco filed the lawsuit on Friday in the US District Court for the District of Arizona.
