Ukraine’s largest bank, PrivatBank, said it had filed a $3 billion lawsuit against the Ukrainian and Cypriot subsidiaries of international accounting firm PwC for alleged breaches during audits of the lender in 2013-2015.
It is the latest in a series of lawsuits initiated since PrivatBank was nationalized in 2016 after risky lending practices left the lender with a capital shortfall of over $5.5 billion, according to the central bank.
Kiev has already withdrawn PwC’s right to audit Ukrainian banks as punishment for its alleged failure to flag evidence of wrongdoing at PrivatBank. PwC has said the ban is unjustified.
The bank said it had filed formal legal proceedings at a Cypriot court against PwC Ukraine and PwC Cyprus.
“PrivatBank asserts it has suffered as a result of serious and extensive breaches by PwC of its duties and responsibilities primarily in auditing financial statements of PrivatBank,” it said in a statement.
“This claim against PwC represents the next significant step being taken by PrivatBank to seek to recover substantial compensation for the huge losses it has suffered, the burden of which thus far has fallen in large part on the state of Ukraine,” it said.
PwC’s Ukrainian subsidiary saidthat it was aware of the legal proceedings.
“We do not believe there is any basis for this action and we will if necessary defend our position vigorously,” the company said in a statement.
The Cypriot division did not respond to requests for comment.
According to the central bank, over 95 percent of corporate loans extended by the lender had gone to companies linked to the former owners and their affiliates.
The bank’s former shareholders Ihor Kolomoisky and Gennadiy Bogolyubov have contested the nationalization and say the central bank misrepresented the health of PrivatBank’s finances.
In December, a London court ordered a worldwide freeze on assets belonging to Kolomoisky and Bogolyubov while it considers the case.
PrivatBank’s nationalization was the culmination of a swingeing clean-up of Ukraine’s financial system, backed by the International Monetary Fund. Dozens of lenders have closed since a pro-Western government took office in 2014.
Re-disseminated by The Asian Banker from Reuters