MF Global and PricewaterhouseCoopers Settle $2 billion Professional Malpractice Case

In March 2017, MF Global and Compass Lexecon’s client PricewaterhouseCoopers (PwC) announced that they had settled a $2 billion malpractice case in New York federal court to the “mutual satisfaction of the parties.” MF Global alleged that PwC’s auditing failures on its financial statements allowed it to carry $6.3 billion in European sovereign repurchase-to-maturity bonds off its balance sheet, and that these holdings caused the firm’s bankruptcy. Terms of the deal, which came after several weeks of trial testimony (including the testimony of MF Global’s causation expert) were not disclosed.

Compass Lexecon Senior Consultant Kenneth Lehn was retained in the case to review and evaluate the opinions concerning causation and damages expressed by MF Global’s experts. PwC’s counsel also retained our Senior Affiliate Dr. Christopher Culp to describe the trading, clearing and settlement mechanisms for European sovereign debt and related repurchase agreements and to review and evaluate portions of the expert reports concerning these mechanisms and the foreseeable risks associated with MF Global’s accumulation of European sovereign debt. Culp and Lehn were supported by members of our Chicago office including David Ross, Tim McAnally, Andria van der Merwe, Bettina Stärkle and our Affiliate Andrea Neves, who also provided assistance to PwC’s counsel as consulting experts. PwC was represented by James Cusick, James Capra, David Fine, Meredith Moss, Emmett Murphy and Paul Mezzina of King & Spalding LLP.