Accounting giant PriceWaterhouseCoopers has asked a federal judge to dismiss claims for millions of dollars in the bankruptcy of Metropolitan...
SPOKANE — Accounting giant PriceWaterhouseCoopers has asked a federal judge to dismiss claims for millions of dollars in the bankruptcy of Metropolitan Mortgage & Securities.
The new management of Met Mortgage contends that PriceWaterhouse, one of the nation’s Big Four accounting firms, was negligent in performing audits of the Spokane-based company.
In a lawsuit filed this fall against PriceWaterhouse, Met Mortgage alleged that in some instances the auditor helped Metropolitan erect financial schemes that masked losses.
A hearing set for Dec. 13 before U.S. District Judge Fred Van Sickle will be the first legal test of accusations that outside auditors should shoulder blame for Metropolitan’s collapse and provide money for creditors.
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About 16,600 investors were owed a total of $470 million in notes when the company filed for Chapter 11 bankruptcy protection in February 2004. Those investors now are expected to recover only 8 cents to 14 cents on the dollar. Thousands more investors are owed $131 million in preferred stocks that are now worthless.
The deep pockets of accounting firms remain Metropolitan’s best chance to recover significant money for investors. The company blames PriceWaterhouse for professional negligence, negligent misrepresentation and breach of contract.
But PriceWaterhouse said in court filings that its work auditing Metropolitan’s books was based upon numbers and reports from former Chairman and CEO C. Paul Sandifur Jr. and his financial team.
The accounting firm said it can’t be blamed for auditing the numbers provided by Metropolitan management.
“The complaint is doomed by its own allegations,” attorneys for PriceWaterhouse argue in their motion to dismiss Metropolitan’s suit. “If the financial irregularities that are the linchpin of their claims in fact occurred, Metropolitan and Summit were the primary wrongdoers.”
Metropolitan lawyer Parker Folse disagreed. “When an auditing firm is hired, it is not to be a rubber stamp,” he said. “It is hired to do due diligence; to make sure the information presented is fair, complete and competent.”
The accounting firm audited Metropolitan and its group of related companies in 1999 and 2000.