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PwC fails to dismiss a lawsuit in $150 million Providence Investment Fund fraud scheme

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The Financial Times reported that a $30m lawsuit against PwC for alleged negligence in its audits of a Guernsey-based $150m Ponzi scheme will go ahead a judge in the Guernsey Royal Court refused the motion to dismiss court proceedings. PwC is accused of failing to discover a fraud at the Providence Investment Fund, which collapsed owing its investors millions of pounds. Providence was put into administration in 2016. The scheme had claimed to make a 48 percent annual return on money invested in Brazil. According to US prosecutors, the scheme’s management used a significant amount of the investors’ funds to make Ponzi-style payments to other investors and to make commission payments to Providence’s nationwide network of brokers. Providence investors worldwide lost a total of more than $100 million.

Administrators to the fund who work for PwC competitor Deloitte claim PwC breached its duties as an auditor by signing off on its accounts despite the fraud in which almost all shareholders’ money was stolen. PwC on Monday said the claim was “misconceived” and that it would “continue to robustly defend” it.

The convicted management team

Providence claimed to invest in a financial venture in Brazil. Instead, 97 percent of investors’ money was used to finance the wider Providence group, according to the court papers. The documents said investors’ cash was also lent to companies in Brazil that were controlled by its founder Antonio Buzaneli. In April 2019, the Florida businessman Buzaneli was sentenced to 20 years in prison in the US as part of a plea agreement after he was accused of orchestrating an investment fraud at the group company, Providence Holdings International.

His accomplices Jose Ordonez, Julio Rivera, and Chris Byrne have also been convicted and sentenced to prison terms in this fraud case:

Antonio Buzaneli was the primary architect of a $150 million Ponzi scheme that targeted hundreds of victims worldwide, many of whom were elderly and vulnerable. Some victims lost their retirement savings, others lost the ability to provide a college education to their children or grandchildren. For these egregious crimes, Mr. Buzaneli will spend the next 20 years behind bars. I applaud our law enforcement partners for their steadfast efforts in seeking justice for the victims.

U.S. Attorney Erica MacDonald

Clean audit for alleged fraud scheme

PwC audited Providence’s 2013 and 2014 accounts, producing “clean” audit reports on the financial statements for both years in April 2016, the court filings said. The administrators claimed this has to be attributed to “negligence, breach of duty and breach of contract” in its role as auditor to the fund.

The judge said the test of whether an auditor was liable for losses stemming from a fraud at a company whose books it checked would be a first for the Guernsey courts. They dismissed PwC’s application. PwC said it would appeal against the decision.

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