PwC Hit by $400 Million Lawsuit
Last week VTech Holdings Ltd filed a $400 million lawsuit against PricewaterhouseCoopers (PwC) stemming from VTech’s acquisition of a business unit of Lucent Technologies in 2000. VTech alleges that PwC concealed information about the unit’s financial condition.
According to the suit, filed in a Manhattan federal court, PricewaterhouseCoopers allegedly convinced VTech to pay $113.3 million for the Lucent unit in order to impress its "bigger paying client." PwC was acting as an advisor for Lucent at the time of the transaction.
"We see no basis for any lawsuit against us," said Steven Silber, a spokesperson for PwC.
VTech, a Hong Kong-based company, designs, manufactures, markets and sells electronic learning and telecommunication products. It paid $113 million for the consumer telephone assets of Lucent, an AT&T spin-off. The acquisition doubled VTech’s consumer telecommunications business and gave it an exclusive 10-year right to use the AT&T brand name in the U.S. and Canada.
However, before the ink on the contract was dry, there were questions surrounding the deal, as reported by Mario Pereira in an October 2000 article in Electronic News. Pereira writes that prior to the acquisition, VTech was a stable, profitable company but after the purchase, VTech had a net debt of $140 million.
In January 2001, VTech sued Lucent for $300 million, claiming that Lucent had failed to disclose problems in the consumer phone business that VTech had purchased. The following year the two sides reached a $34 million settlement.
As a result of the newest litigation, PwC has resigned as VTech’s auditors and VTech has retained KPMG as its new auditors.