Audit Firms' Global Ambitions Come Home to Roost

Audit Firms' Global Ambitions Come Home to Roost - 2/3/2009 , Class Action News, Class Action, Securities News, shareholder class action, claim, litigation, securities action, common stock'>

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2009 News and Press Releases

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Audit Firms' Global Ambitions Come Home to Roost, In The Parmalat Fraud Case, A Judge Serves Notice That Audit Firms Can't Boast Of Global Reach While Claiming No Connection To Local Units

Business Week Online. February 3, 2009
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EXCERPT: In a lawsuit over the demise of an Italian milk company, global audit firms this week were sent a serious warning that they may be on the hook for a host of local blowups they had long sought to avoid. Though they heavily market their global reach to clients, the Big 4 and other large accounting firms have long argued in legal proceedings that their global entities are simply loose affiliations. But in a Jan. 27 ruling in a case centered on Italian shelf-stable milk maker Parmalat, Judge Lewis Kaplan of U.S. District Court for the Southern District of New York ruled in effect that they can't have it both ways. Auditing has never been more global than it is today. That point was driven home with news coverage of the Jan. 24 arrest of two partners of Price Waterhouse India over the audit of tech outsourcer Satyam. And the prospect of rising liability is something none of the Big 4 welcomes. "All of them have structures designed to build fire walls" between local companies and the global firm, says Stanford law professor and former SEC commissioner Joseph A. Grundfest. "The question is, will the dikes hold when you have this kind of a flood?" In the case involving Parmalat, Judge Kaplan held that Deloitte Touche Tomatsu, or DTT, the global network, and its former CEO, James Copeland, should remain defendants in a shareholder case seeking damages from an alleged fraud. Kaplan cited DTT's marketing practices and financial and other links between Deloitte firms in Italy and Brazil and the global firm DTT. "The judge said you can't sell yourself and run your business like that and then say, 'no, we're just a loose affiliate under Swiss law,'" says Stuart Grant, a partner at Grant & Eisenhofer and co-lead counsel for the plaintiffs.

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