18 September 2003

Arkansas Rulings May Hurt Reputation Of Pricewaterhouse


TEXARKANA, Ark. -- A pair of judicial orders sanctioning PricewaterhouseCoopers LLP for misconduct in a civil lawsuit here cast a harsh spotlight on the accounting firm and its top U.S. partner, Chairman Dennis Nally, as well as their recent efforts to restore public trust in the firm.

The orders by Miller County Circuit Court Judge Kirk D. Johnson include findings of document destruction by the firm and misrepresentations by the firm to the court about Mr. Nally's knowledge of the facts underlying the suit. The findings prompted Judge Johnson to sanction PricewaterhouseCoopers $50,000 in a March 28 order for engaging in a "systematic course of conduct intended to obstruct the discovery process."

A PricewaterhouseCoopers spokesman Wednesday said Mr. Nally was unavailable to comment. In a court filing Friday, opposing a motion by the plaintiff in the case for further sanctions, PricewaterhouseCoopers wrote that "PwC has taken steps to preserve, collect and produce documents responsive to plaintiff's discovery requests. Those efforts have resulted in the production by PwC of hundreds of thousands of pages of documents, approximately 80 CD-ROMs of engagement letters (roughly equivalent to one million additional pages of information) and an additional 24 CD-ROMs and 2 DVD-ROMs of billing and invoice data (roughly equivalent to an additional two million or more pages of documents.)."

Two items worth mentioning here:

1. Reputation Risk is an intangible reality. For a firm who counsels their clients on the same, this will cost them dearly. I trust they are using some of their own strategy here on how to handle this.

2. Electronic Discovery and Retention Planning. This firm already has experience in the forensic investigation process. They already know how to meet the toughest demands on their data centers. Desktop data, e-mail documents and backup tapes are frequently sought as part of the litigation process. In addition to your active systems, you may be required to analyze data residing on equipment which is no longer
supported, or on tapes for which you no longer possess compatible drives. As a discovering party, you may be tasked with creation of a database of responsive documents, having been provided with large volumes of electronic files in a host of various data formats. Then you have to search and filter these files, de-duplicate them and convert them into formats compatible with your input requirements.

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