PwC faces lawsuit from investors of former Brazilian client accused of fraud

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A group of 193 minority shareholders, assisted by an investors’ association, has filed a claim for damages against the audit firm PwC.

They accuse the consultancy of having been “silent” when reviewing the balance sheets of IRB, a Brazilian state-controlled reinsurance company whose shares plummeted from BRL 44 to BRL 1 between 2019 and 2022, after an independent asset manager pointed out fraud in the company’s reports.

Investors claim to have lost BRL 95 million due to the shares’ unexpected devaluation.

They are preparing a similar claim regarding PwC’s audits of balance sheets provided by Americanas, a massive retail group. The company reported accounting “inconsistencies” of more than BRL 20 billion earlier this month, which led the retailer to file for bankruptcy protection last week.

Representatives of the investors’ association told finance website Infomoney that the question is whether the consultancy failed to comply with accounting standards since it would have been aware of the fraud and failed to alert investors. The entity invites other investors to join the claim until February 10.

The entity quotes the case of Banco do Nordeste, a Brazilian regional bank, as an example of a prior sentence against PwC.

In 2013, the audit firm was ordered to pay BRL 25 million in compensation to investors for failing to notify them of evidence of millionaire embezzlement in the bank’s accounts before it was sold to Santander.

PwC says it does not comment on the balance sheets of the companies it audits, due to “questions of confidentiality.”

Last week, the same association filed a request for arbitration at the B3 stock exchange against Americanas and the company’s reference shareholders 3G Capital, seeking compensation of BRL 500 million.

Also today, a judge from the business court of Rio de Janeiro accepted a class action filed by another entity, Ibraci, against IRB. Aggrieved shareholders have 20 days to join the lawsuit.

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.