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November 29, 2022

Some Partners at PwC Cyprus Did Not Want to Lose Their Russian Clients So They Started Their Own Firm

a stock photo of Cyprus

In March of this year, Deloitte Global posted a little message on its website about the then-developing situation in Ukraine saying the firm had “suspended business operations and client service in Ukraine as we focus on taking care of our people and their loved ones.” Within days, that message changed to saying they are “currently reviewing our business and presence in Russia,” making Deloitte the first Big 4 firm to publicly express that they were considering pulling out of Russia. Ironically, Deloitte was the last of the Big 4 to actually pull out and announce they would cease operations in Russia. The pullout announcements came fast (are we still doing phrasing?) but the process of pulling out wouldn’t come as easy.

EY, KPMG, and PwC employ 15,000 people in Russia between them and it was never going to be as simple as global firms kicking out their Russian arms and ghosting Russian and Russia-adjacent clients. Earlier in the year, Deloitte said their exit from Russia would take a few weeks, PwC said it would be “completed as soon as practicably possible,” KPMG didn’t give an ETA at all, and EY said it could take eight to 12 months meaning they are likely still untangling Russian operations. All that to say, it’s complicated.

PwC’s break was perhaps the least complicated, if not the most extreme. On March 6, PwC Chairman and my Big 4  leader mancrush Bob Moritz tweeted a statement regarding the situation in Ukraine which said that under the circumstances, PwC should not have a member firm in Russia and consequently PwC Russia will leave the network. Shortly thereafter, the firm said in a June statement that “any sanction on Russian entities or individuals that is passed anywhere in the world will be applied everywhere in the world.” Meaning they would respect all sanctions anywhere, whether legally required to or not.

Well today we’ve learned that three partners from the PwC Cyprus office who are bound and determined to provide exceptional client service to Russia-connected clients took early retirement in June and are setting up their own practice that will allow them to continue to serve these clients. They’re calling the new joint Kiteserve and City A.M. has some details. Curiously, the addresses listed on Kiteserve’s website — Julia House, 3 Themistocles Dervis street in Nicosia and City House, 6 Karaiskakis Street in Limassol — are PwC addresses.

PwC Cyprus Julia House map

A PwC spokesperson told City A.M. the new firm is temporarily subletting the space and they will be working in a completely separate space from the PwC Cyprus team.

FT says PwC’s stance on sanctions “had a particularly large effect on PwC Cyprus, given the extensive links between Russia and Cyprus, thinning the firm’s roster of clients” which motivated the newly-separated partners to start up their own firm. “The Big Four went well beyond the sanctions imposed by these countries . . . and, effectively, we’re covering that space to a certain extent, but . . . we were very selective,” said Kiteserve MP Theo Parperis. He estimates about half of Kiteserve’s clients had ties to Russia.

Per FT, the founders struck a deal with PwC Cyprus that freed them from the five-year ban on former partners selling audit, tax, or compliance services and the new firm will be allowed to poach talent from their former firm. No word on how much this deal cost them but we imagine it wasn’t cheap. Anyone else think this sounds a bit sus? So these guys have no restriction on competing with the firm post-retirement, they’re working out of the same office, and the firm is cool with them hiring away talent? Hmm.

Cypriot PwC partners set up new firm to continue working with Russian clients [City A.M.]

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