The Moscow Arbitration Court held hearings in the case March 20 and ruled that the company violated professional standards while conducting audits for Yukos in 2002-2004 and must pay a fine in the amount of $480,000 to the federal budget. The court decision could provide grounds for the Finance Ministry not to renew the auditor's auditing license, which expires May 20.
According to the Kommersant, the full text of the court decision, prepared March 27, harshly criticizes PricewaterhouseCoopers for its participation in illegal tax evasion activities and accuses the company of siding with Yukos officials to "intentionally deceive shareholders by providing them with unreliable information."
PricewaterhouseCoopers' press service issued a statement at the time, saying that the audits were conducted "in full conformity with professional standards and current legislation." The company said the court ruling was unsubstantiated and based on a fundamentally different understanding of an auditor's role and functions.
The court ruling could have a negative effect on the extension of the company's audit license in Russia. PwC filed an extension request March 28, and the Finance Ministry should decide by May 20 whether the extension can be granted.
The case has not only raised concerns among market participants, but has also been brought up at the political level. U.S. Secretary of State Condoleezza Rice, U.S. Finance Secretary Henry Paulson and U.S. Ambassador to Russia William Burns relayed Washington's concerns to various Russian officials and the Arbitration Court.
The U.S. Administration has warned Russia that revoking the license from the company that conducts auditing of about 50% of Russian enterprises could seriously affect the country's economy. Among possible repercussions, the U.S officials warned of reduced foreign investment, complications during Russia's WTO talks, and serious problems Russian companies could face while conducting initial placement of their shares on foreign bourses.
Under the Russian law, PwC has until April 27 to appeal the court decision, and the appeal could be under review for at least a month.
