The part you need to know about District Judge Marrero's decision in MF Global v PwC yesterday:
Judge Victor Marrero held: “[u]nder PwC’s reasoning, the in pari delicto doctrine would insulate an auditor from liability whenever a company pursues a failed investment strategy after receiving wrongful advice from an accountant. Such a broad reading of the doctrine would effectively put an end to all professional malpractice actions against accountants – – an outcome not in line with [New York law].”
As you know, back in March, MF Global sued PwC for a whopping $1 billion, claiming "PwC committed professional malpractice by offering 'flatly erroneous' advice concerning, and approval of, the off-balance-sheet accounting treatment for the debt by MF Global and its then-chief executive, Jon Corzine."
PwC was able to get off the hook for AIG's spectacular decline (by way of a suit brought by the Teachers Retirement System of Louisiana) using the ole in pari delicto excuse a few years back. At the time, PwC lawyers explained it thusly:
On October 21, 2010, the New York Court of Appeals issued an opinion answering a certified question of law in favor of Cravath client, PricewaterhouseCoopers LLP (“PwC”), in an important ruling on the in pari delicto doctrine in New York. This doctrine prevents one wrongdoer from maintaining a lawsuit against another alleged wrongdoer. It is an important defense for auditors and other professional advisors in actions brought by plaintiffs, such as bankruptcy trustees and shareholder derivative plaintiffs, on behalf of a company whose former management is alleged to have engaged in wrongdoing.
As Judge Marrero points out, leaving that door open gives auditors absolutely no compelling reason to be accountable for any future MF Globals or AIGs or even Enrons because hey, they were wronged.
If you aren't aware, in pari delicto is loosely translated from Latin as not our fucking fault, bro.
Full decision included for your reading pleasure below:
