Ukraine’s largest bank, PrivatBank, said on Monday it had filed a $3 billion (€2.4bn) 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 nationalised 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Kiev has already withdrawn PwC’s right to audit Ukrainian banks as punishment for its alleged failure to flag evidence of wrongdoing at PrivatBank.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 last Friday.
“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 Cyprus responded later on Monday saying: “PwC Cyprus audited the financial statements of PrivatBank’s Cyprus Branch up to the year ended 31 December 2015. PwC Cyprus performed its audit work in accordance with the applicable law and regulations and the international auditing standards. At PwC, we take our professional obligations extremely seriously. We do not believe there is any basis for this action and we will defend our position vigorously.”
In December 2016, Cyprus restricted PrivatBank’s operations on the island to the repayment or renewal of existing deposits and the acceptance of payments towards existing credit facilities, as well as the repayment of administrative expenses relating to the operations of the branch.
The decision was in accordance with the provisions of the business of credit institutions law and took into account developments and the protection of the bank’s creditors.
According to the central bank, over 95 per cent 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 nationalisation and say the central bank misrepresented the health of PrivatBank’s finances.
In December, a London court ordered a worldwide freeze on the assets of Kolomoisky and Bogolyubov while it considers the case.
PrivatBank’s nationalisation 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.