September 8th, 2010

PWC Reversal Highlights Perils of Doing Business in Russia

PWC, Kommersant

Accounting Firm Drops Audits Under Pressure from Kremlin

PricewaterhouseCoopers (PWC) today finds itself thrust into the middle of the world’s highest-profile political show trial – accused by the defendant, Mikhail Khodorkovsky, former Yukos Oil CEO, of improperly withdrawing ten years of certified financial audits to keep PWC executives out of deadly Russian prisons. As the “trial” in Moscow edges towards the end of its critical defense phase, lawyers for Khodorkovsky and his co-defendant Platon Lebedev are engaged in proceedings in the U.S. to show that PWC executives caved to threats by corrupt government officials to help prosecutors bolster their fabricated case, which numerous independent courts and political observers have dismissed as a farce. The stakes are running high as a guilty verdict in the Moscow trial would land Khodorkovsky and Lebedev in prison for another 15 years and thwart much-needed investment in Russia. In the U.S., Khodorkovsky’s defense team has asked the California Board of Accountancy to revoke the licenses of Douglas Miller, the then-PWC partner who approved the audit-opinion withdrawal, and requested the U.S. District Court in Manhattan to order PWC to produce documents related to its decision.

 This situation symbolizes why the Russian business community is not free — a business leader is jailed because he is viewed as a political threat and then his company’s independent auditor, a leading international firm, is attacked and forced to choose between its professional integrity and its professional survival in Russia,” said Pavel Ivlev, Chairman, Committee for Russian Economic Freedom.

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