Price Waterhouse seeks settlement with US regulator

Kripa Raman Mumbai | Updated on February 18, 2011

Price Waterhouse is seeking to end through settlement the proceedings against it by the US stock market regulator Securities and Exchange Commission (SEC) for its role in the Satyam accounting fraud, it is reliably learnt.

A settlement with the SEC could help PW India in the matter of SEBI's proceedings against it, said legal experts. SEBI had alleged that partners of PW's Hyderabad arm were involved in falsification of Satyam's accounts.

In the context of settlements, Mahindra Satyam (erstwhile Satyam Computer Services) agreed to pay — on Thursday — $125 million to settle a number of class action suits filed against it in the US.

The crash

American Depository Receipts of the erstwhile Satyam Computer Services crashed on the New York Stock Exchange after the founder-chairman of the company admitted in early 2009 that its accounts were falsified, prompting the class action suits.

In the matter of Price Waterhouse, audit firm to Satyam, SEC is examining whether the firm played a part in the scam; and whether the firm's US affiliate Price WaterhouseCoopers also had knowledge of this.

On the domestic front, SEBI had issued in 2009 a show cause notice to PW asking it to explain its role in the Satyam scam. At this PW moved Bombay High Court challenging the jurisdiction of the capital market regulator.

Argument and dismissal

It argued that audit firms are registered with the Institute of Chartered Accounts of India; they are not market intermediaries and therefore cannot be regulated by SEBI. But this case was ultimately dismissed by the Court.

PW also attempted to close the case through a consent settlement with SEBI but that was rejected by the regulator. A consent order is like an out-of court settlement in which the accused agrees to pay a specified sum to settle the case on mutually agreed “consent terms”.

SEBI also turned down PW's request for cross examination of 15 witnesses; the audit firm had said that this was necessary to prove that the charges against it were baseless. PW then approached the Securities Appellate Tribunal against SEBI and that is whether the matter stands.

SEBI will now have to wait for the SAT order before proceeding against the audit firm. Either party can also move the Supreme Court, in case the SAT order goes against them.

Published on February 18, 2011

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