A Hong Kong court has ruled that PricewaterhouseCoopers International Ltd. cannot be excluded from a $8.4 billion lawsuit initiated by the liquidators of China Evergrande Group. This decision, issued on Wednesday, means the global umbrella entity for PwC and its mainland China and Hong Kong affiliates will remain defendants in one of the largest corporate claims ever seen in the city.
The liquidators are seeking a total of 57 billion yuan ($8.4 billion) from PwC. Specifically, $5.6 billion (38 billion yuan) is being sought from PwC International, along with its mainland China and Hong Kong affiliates. An additional $2.8 billion (19 billion yuan) is being pursued solely from the Hong Kong and mainland entities of PwC. The lawsuit alleges accounting fraud by PwC in its auditing work for Evergrande during 2019 and 2020.
This development comes as Evergrande's liquidators are also challenging a separate HK$1 billion ($128 million) settlement reached between PwC Hong Kong and Hong Kong's Securities and Futures Commission (SFC). The liquidators argue that this settlement, intended to compensate Evergrande's minority shareholders, improperly prioritizes them over creditors and exceeds the SFC's statutory authority. A judicial review hearing on this matter recently concluded, with judgment reserved. The liquidators contend that Evergrande's massive debt of HK$350 billion means there is no possibility for shareholders to receive any payout, making the SFC's deal unlawful and invalid.
The ongoing legal battles highlight the significant financial and regulatory pressures facing PwC due to its audits of Evergrande. PwC's mainland China affiliate was previously fined 441 million yuan ($64.9 million) for its role in auditing the Chinese developer. The liquidators' actions against both PwC International and the SFC underscore the complex and multi-faceted efforts to recover funds amid Evergrande's collapse.
