The Securities and Exchange Commission has settled two high-profile cases involving PricewaterhouseCoopers in the last few days, resulting in individual auditors being barred from public company audits, but no sanctions against the firm.
For more than three years, the Securities and Exchange Commission has been investigating PricewaterhouseCoopers and its role in accounting irregularities at MicroStrategy, Inc., once a high-flying player in the heyday of the Dot-com era.
Last week, the SEC ended its investigation of PwC, resulting in no enforcement actions against the Big Four accounting firm. "This closes the book on MicroStrategy," PricewaterhouseCoopers spokesman Steven G. Silber said.
However, Warren Martin, the former lead auditor for PwC in the MicroStrategy engagement, has been barred from auditing publicly held companies for a minimum of two years. Martin's sanctions came as a result of failure "to act with due professional care" and "maintaining an attitude of professional skepticism," when he relied exclusively on what management was telling him, without independent verification.
When MicroStrategy first announced in March, 2000 that it was adjusting its financial statements to conform to SEC guidelines for revenue reporting, it sent shockwaves through the Dot-com world, and investors got very nervous. "This one popped the bubble," financial commentator James J. Cramer wrote. "MicroStrategy forever changed the Internet mania."
Tyco International Ltd.
Richard Scalzo, a partner in PwC's Boston office, has been permanently barred from auditing public companies as a result of his role in the audit of Tyco International, Ltd. SEC investigators determined that Scalzo, the lead partner on the Tyco audit, "recklessly violated" securities laws and engaged in unprofessional conduct.
"Multiple and repeated facts provided notice to Scalzo regarding the integrity of Tyco's senior management and ... Scalzo was reckless in not taking appropriate audit steps in the face of this information," the SEC said.
The SEC admonished Scalzo for his conduct, but said that there was no criminal activity or intent on his part or on the part of PwC. No criminal charges will be brought against either Scalzo or the firm.