Posted by: russiaoilandgas | July 20, 2007

GML Accuse PwC of Cutting Deal to Avoid Tax Debt, Loss of License

PwC PricewaterhouseCoopers Audits Yukos Oil ScandalLast week PricewaterhouseCoopers learned that the Russian Higher Arbitration Court had overturned a previous ruling that found it guilty of owing $9.6 million in unpaid tax.  Little over a week later, the Moscow Times has reported that PWC has received its second major boost from Russian authorities in its battle to clear itself of any wrongdoing in the Yukos scandal.  The accountancy multinational confirmed yesterday it had received a letter from the Russian General Prosecutor clearing it of any transgressions in its auditing of Yukos.  However, PwC’s new found good fortune has raised suspicious at Yukos’ majority shareholder GML.

Mikhail KhodorkovskyAs reported by Oil and Gas Eurasia several weeks ago, PwC withdrew its audits of Yukos between 1995 and 2004, arguing it could not guarantee their validity. This decision has strengthened the case against disgraced former Yukos chief executive, Mikhail Khodorkovsky, who, despite being incarcerated in a Siberian prison, faces new charges of embezzling $32 billion in oil sales from Yukos.

This sequence of events has led to GML Managing Director Tim Osborne to suggest that a deal has been cut between PwC and the Russian authorities. Speaking to the Moscow Times, Osborne said: “We have not seen any credible reason for withdrawing the audits. It seems to me they have some sort of deal with the prosecutors that will allow them to avoid the tax bill and keep their license.”

The basis of PwC’s withdrawal of audits was a letter sent to Yukos’ liquidator in which it claimed that Yukos top management had misled them regarding a number of oil trading firms that Yukos declared were not related parties.  However, in the Moscow Times, Osborne has denied this was the case: “They had complete and full disclosure with regard to these companies when they conducted the audits.”

PwC has flatly denied all accusations of deal-cutting, stating yesterday that its recent reversal of fortune had nothing to do with its withdrawal of audits, which was, according to a statement quoted in the Moscow Times, entirely legitimate and was not done to relieve legal pressure.

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