|Mr Paul Boorman, Global Leader - Operations for PricewaterhouseCoopers|
|Dr Coenraad Van Beek, Global Leader for Ethics and Business Conduct in PwC|
Gentlemen, Malaysia, together with many other countries hit by the 1997 Asian Crisis, became committed to a rapid transformation of the corporate governance system after the crisis highlighted the inherent weaknesses in the previous corporate governance framework. With the entire world flirting on and off with a continuous crisis situation now, no country, including Malaysia, will expect to repeat the mistakes of the past.
We ask that PwC treats any questions regarding the propriety of PwC Malaysia's conduct, as a whole or in part, with the same seriousness you would give to the conduct of your office in a larger market, especially considering that PwC Malaysia is responsible for the audits of more than a hundred of Malaysia's public listed companies, and is, in fact, the largest auditing firm in the country.
PricewaterhouseCoopers LLP sold its global management consulting and technology services business to IBM Corp back in 2002.
Part of the condition given by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) for the sale to IBM Corp, in the no-action letter from the Office of the Chief Accountant , says that failure to comply with any of the terms, representations or conditions enumerated in the letter will vitiate the no-action position.
The sale was for all ongoing businesses, assets and liabilities in PwC's Management Consulting and Technology Services Business worldwide, lock, stock and barrel, to IBM Corp. In Malaysia this should include PricewaterhouseCoopers Consulting Sdn Bhd (464379-U), but that did not happen.
Instead, a company called PricewaterhouseCoopers Consulting (East Asia) Sdn Bhd, which was renamed as PwC Consulting Malaysia Sdn Bhd (289801-A) on 20-11-2001, was disposed off to IBM Corp as part of the sale.
This act included the appointment as Directors of a Mr Foong Weng Chee, who was running his own accounting firm, Foong Weng Chee & Co, at the time of his appointment as Director in the renamed PwC Consulting Malaysia Sdn Bhd, and has never been involved in PwC's Consulting business, as well as the appointment of a Ms Chu Kum Yoon who was a Company Secretary at the material time of her appointment in the same company. She has also never been involved in the consulting business of PricewaterhouseCoopers in Malaysia. You can read the entire argument here, on the appointment of 'sham' Directors.
Subsequent to that, PricewaterhouseCoopers Consulting Sdn Bhd (464379-U) has remained under a quartet of Senior Partners of PwC Malaysia, namely, the Executive Chairman of PwC Malaysia, Dato Johan Raslan, The MD of PwC Malaysia, Mr Chin Kwai Fatt, the Tax Partner of PwC Malaysia, Mr Koo Chuan Keat , and Senior Partner in PwC Malaysia, Mr Lee Tuck Heng as the Directors, Secretary and/or shareholders till today.
This is in clear violation of the no-action letter from the SEC.
So, is the sale process that began in 2002 complete yet, seeing that PricewaterhouseCoopers Consulting Sdn Bhd (464379-U) still exists, and if the sale is still technically incomplete, will this not make all the global audits of IBM Corp for the past 8 years suspect or invalid, if not downright illegal, as it establishes a direct financial interest between the auditor (PwC) and the client(IBM)?
And what about the audits of IBM in Malaysia by PwC?
And since it is still ongoing, more than 8 years after the sale, it has basically made point no. 9 in the no-action letter moot.
The conditions described in your letter include, among other things, that
9) indemnification claims for certain losses must be made by IBM within two years of the closing and the aggregate amount of such claims may not exceed 12.5% of the purchase price;
PricewaterhouseCoopers Consulting Sdn Bhd (464379-U) remains in existence to hide contingent liabilities to the tune of several hundred million Ringgit. To add insult to injury, PricewaterhouseCoopers Consulting Sdn Bhd (464379-U) is also using tainted auditors to audit its books. You can read about it here.
Why would the premier auditing company in the country, and one of the big 4 worldwide, use the services of any auditor that is tainted with impropriety for any of its own companies? In this case, a company that is hiding millions in contingent liabilities, and should have been part of a headline grabbing sale 8 years ago?
With all humility, we ask that efforts be taken by the global office to dissolve PricewaterhouseCoopers Consulting Sdn Bhd (464379-U) by the end of February 2011, as there is no rational explanation for its continued existence except to defraud creditors by hiding its contingent liabilities. This is inexcusable for any entity, and doubly so for an auditing firm of PwC's repute.