Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

PwC Is Criticized for Pulling Yukos Audits

Yukos' former managers on Monday criticized PricewaterhouseCoopers for withdrawing its audits of the now-bankrupt oil firm and said the world's biggest auditing firm was "bowing to Kremlin pressure."

PwC said Sunday that it had withdrawn its audit reports for Yukos for the years ending 1995 through 2004 after new information came to light, a step that could hinder Yukos shareholders' efforts to seek restitution in international courts for the destruction of the company.

"PwC said they had new information but they wouldn't tell anybody what it is," Tim Osborne, director of GML, Yukos' main shareholder, said by telephone Monday. "Until they say what it is, we have to assume that PwC is bowing to political pressure from the Kremlin."

But a spokeswoman for PwC in Russia dismissed any suggestion of state pressure.

"The only pressure we are experiencing is the pressure of professional audit standards," the spokeswoman said in e-mailed comments Monday. She refused to be identified, citing company policy.

"PwC now believes information and representations which were provided to PwC by Yukos's former management may not have been accurate," a statement on PwC's web site said Sunday. The auditor said its decision to pull the reports was influenced by some former shareholders and management of Yukos continuing to encourage others to rely on them.

Yukos was declared bankrupt last year and its assets sold off in a series of bankruptcy auctions. Former CEO Mikhail Khodorkovsky and his business associate Platon Lebedev are currently serving eight years in jail on tax and fraud charges. Earlier this year, prosecutors filed new charges of money laundering against the pair. Yury Shmidt, a lawyer for Khodorkovsky and Lebedev, said Monday that PwC's withdrawal of audits so long after they were carried out was unprecedented.

"PwC was confronted with a dilemma: Either continue working in the lucrative Russian market or lose its powerful clients," Shmidt said. "It opted to stay, and hence this unprecedented step without analogy in auditing practice."

Last year, a lawsuit filed by the Federal Tax Service questioned PwC's audit of Yukos' tax filings and said that the auditor had helped Yukos disguise profits.

In December, the tax service demanded $145,000 from PwC, the amount it was paid for carrying out the audit. The Moscow Arbitration Court later increased the fine to $480,000. Since that ruling, oil pipeline monopoly Transneft dropped PwC in favor of KPMG, and carmaker AvtoVAZ said its board would recommend that shareholders replace PwC with Ernst & Young. But state-run Gazprom and Sberbank have retained PwC's auditing services.

In March, investigators raided PwC's offices in Moscow in connection with its 2002-2004 audits of Yukos and a separate investigation into whether PwC evaded taxes of 243 million rubles ($9.3 million) in 2002.

Last month, Moscow's Tverskoi District Court declared the raid illegal and ordered the authorities to rectify the violations.