Providence Investment Fund administrators are suing PwC for £14 million, citing breach of contract, breach of duty, and negligence as auditors. This means that investors who lost a whopping £37 million in a Guernsey Ponzi scheme may be able to recover some of their losses. PwC plans to vigorously defend the action.
The Providence Investment Fund promised investors returns that could be as high as 14% but collapsed in 2016. PwC, a big four accounting firm audited a company that Providence used. Providence utilized this firm to gather investor money, according to papers filed at the Ordinary Court in Guernsey.
Providence Investment Fund lawyers allege that PwC was negligent during its audit process and that, as such, the accounting firm was in breach of its duties. It argues that this negligence and breach of duties resulted in investors investing £14,012,730 into the fund.
According to the papers, the PwC audits gave Providence Investment Funds PCC Ltd’s (PIF) financial statements a clean assessment for the period spanning October 2012 to December 2013. The December 2014 year-end statements also received a clean assessment. PIF was regulated in Guernsey and claimed that it invested in Brazilian firms.
However, according to court documents, Antonio Buzaneli, the company chief executive, and others used PIF as a Ponzi scheme during the PwC audit. Buzaneli did indeed plead guilty to a charge of conspiracy to commit mail fraud in April 2018.
According to the papers filed, at one point, a full 97% of investors’ money did not reach the Brazilian firms it was supposed to be invested in. Instead, it went to the Guernsey company named Providence Global Limited. Essentially, the filing indicates that PwC should have come across some of these issues in its audit and that, by failing to do so, it was negligent and breached its duties.
Unsurprisingly, PwC plans on fighting the suit and is disappointed in the action. The company feels that the claim was misconceived and plans on “vigorously defending” its position.
What Will Happen
Mathew Newman, legal representation for the Providence Investment Fund administrators, indicated that if the suit is successful, investors will see some of the award. The question, however, is not only whether Providence will win the lawsuit and receive the funds, but also how much the high-net-worth individuals who invested with them will actually get back. a
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