Off the court

This is going to take quite a while...

Court cases are one of the few times where the inner workings of a company can come to light. Emails, text messages and testimony can bring to life what is really going inside an outfit. It provides the human factor we can all relate to (and has made me permanently cautious about what I write in email, text etc).

The catch is these cases typically take a long time (years and years) to wind their way through the system - and many end up settling before they reach court.

Big four and courts

Earlier in the year, I had a go at looking at all of the major actions against the big four firms in Australia: Court actions against Deloitte, EY, KPMG and PwC.

I learned there are quite a few active cases, the last big (disclosed) settlements were worth $67 million (PwC in the Centro case) and $125 million (EY in the Sons of Gwalia case), and the firms hold the strong (STRONG!) view that class actions are usually nothing less than shakedowns. (The class action firms disagree, of course.)

I also found out that class actions are an absolute pain to write about because of the number of claims and cross-claims involved.

In one case, it took me several hours to finalise a few pars describing who was suing who. That included a lawyer for one of the parties changing the tense of the lines I was fact-checking. That is, a firm paid to have their external counsel fact-check some pars and this individual couldn’t help themselves but mark it all up. They even introduced some legalese (which would never get past the subs) as a bonus. 🙃

I also read quite a few submissions to the various cases. There is a tone that lawyers can fall into, a shifting combo of outrage, indignation and dismissiveness, that I quite admire. But it’s typically way too wordy.

Privilege against self-incrimination

This brings me to stories my colleague Hannah Wootton covered this week about a novel legal argument been put forward in two separate cases involving the big four.

Partners at Deloitte and PwC are using the legal strategy of claiming the privilege against self-incrimination to deny court orders to hand over documents relating to their audits of two collapsed companies.

In the Deloitte case, there is the extra wrinkle that one of the partners who successfully claimed privilege against self-incrimination then took the files in question and is refusing to hand them over to “non-involved” Deloitte partners.

Deloitte’s “non-involved’ partners have then filed an appeal arguing that all its partners should have the privilege against the production order.

Legal experts reckon a Deloitte victory could have real consequence:

University of Adelaide associate professor in accounting and professional ethics Bryan Howieson:

There’s certainly serious long-term professional consequences if firms aren’t responsible for partners’ work ... it will be good for the firms, make them a lot more difficult to hold to account.

The consequences could be enormous as it could extend to all professions, to law and healthcare. It could certainly go further than just accounting firms.

Australian National University law professor Peta Spender:

It would have an extraordinarily undesirable effect.  It feeds into many, many different questions about the accountability of partnerships in our modern economy and democracy.

University of Sydney professor and head of the finance discipline Sandra van der Laan:

Deloitte would be saying to their audit clients’ shareholders, 'we don’t want to share our documents'. As a shareholder, you want an auditor to protect your interests, not theirs, so would you want to engage an auditor like that?

The judgement is due soon. I can’t wait.

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