Evergrande liquidators start legal action against PwC for negligence in auditing work
Evergrande liquidators start legal action against PwC for negligence in auditing work
China Evergrande Group’s liquidators have launched court proceedings against PricewaterhouseCoopers, another legal step to recover at least a fraction of creditors’ investments from the property developer.
Lawyers of liquidators have started actions against PwC and its mainland China airm PricewaterhouseCoopers Zhong Tian, according to Hong Kong court documents seen by Bloomberg. The lawsuit was filed in March and recently made public.
Liquidators launched court proceedings against PwC’s “negligence” and “misrepresentation” in auditing work. The claim relates to PwC’s reports on Evergrande’s financial statement for 2017 and the first six months of 2018. That’s ahead of the 2019 and 2020 period, during which Chinese securities regulators said the developer overstated its revenue.
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The legal action comes along with liquidators’ attempt to recover US$6 billion in dividends and remuneration from seven defendants, including founder Hui Ka Yan and his ex-wife Ding Yumei, former CEO Xia Haijun, former CFO Pan Darong, according to a stock exchange filing this week.
PwC has been in the spotlight for its role in Evergrande’s accounting, after Chinese authorities launched an investigation into one of the nation’s biggest financial frauds.
Authorities earlier this year said it would impose a 4.18 billion yuan (US$584 million) fine against Hengda, Evergrande’s main onshore unit. Regulators said the unit overstated its revenue by 564 billion yuan in the two years through 2020.
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PwC Zhong Tian, a Shanghai-registered firm that is part of PwC’s global network, was Hengda’s auditor during the period in question. It served as Evergrande’s auditor for more than a decade until its resignation in January 2023 due to audit-related disagreements.
The liquidators also started court proceedings against global commercial real estate services company CBRE Group and Avista Valuation Advisory over valuation reports they produced for Evergrande and its subsidiaries in 2018, according to a separate court document seen by Bloomberg.
