PwC Charged by San Francisco Under Consumer Laws

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The City of San Francisco has accused PricewaterhouseCoopers of violating consumer protection laws by filing improper reports with the state Insurance Department. If the charges hold, Deputy City Attorney David Newdorf said, this will be the first time these laws were used against auditors who knew about fraud and submitted false audit reports to the state.

The charges stem from a scandal involving Old Republic Title Company. This case was dubbed a "win for the consumer" after the company was found guilty of unfair business practices and ordered to pay the state and class members $32.8 million. Specifically, Old Republic was accused of:

  • Pocketing "secret interest" by failing to advise 400,000 customers of their rights to receive the interest on their escrow accounts.
  • Failing to turn over to the state the money in dormant accounts as required by law.

For its role in failing to report the acts and filing clean opinions with the Insurance Department, PwC was charged with unfair business practices (under the Business & Professions Code section 17200) and violating California's false claims act (under Government Code section 12651).

A trial court judge had previously dismissed the charges, saying it was not clear that PwC's reports had caused damages. But the case can be reopened now in response to an appeal by Old Republic. In a court document filed to reopen the charges, Mr. Newdorf charged that PwC knew of the fraud but did not report it to the state.

The damages sought by the City include unspecified civil penalties, attorneys fees and disgorgement of the fees PwC made from handling Old Republic's accounting work over a ten-year period. PwC's attorney said the claim is without merit and the firm will ask the appellate panel to deny the City's request to pursue claims against PwC at a new trial.


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