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The PwC Withdrawal

Over the weekend, accounting firm PricewaterhouseCoopers (PwC) finally folded under Kremlin pressure and withdrew its Yukos tax reports. Prosecutors have threatened to revoke PwC’s license in Russia. Some quotes:

Former Yukos managers Steve Theede, CEO from July 2004, and Bruce Misamore, chief financial officer from April 2001, said in a statement yesterday that during their tenure, the information provided to PwC was complete and correct. “It is inconceivable that there is any ‘new information’ that PWC did not have already or had access to because they had full access to everything available to the management of the company,” they said. A spokeswoman said the former managers, whose tenure ended with Yukos’s bankruptcy declaration in 2006, have written to PwC’s CEO in the U.S. seeking an explanation.

And from the FT (front page story):

“I don’t think anyone is going to believe this is anything other than bowing to pressure from the Kremlin,” said Tim Osborne, managing director of GML, the main shareholder of Yukos. “I’m astonished to see such a complete lack of backbone in an organisation like that.” The move will strengthen the Kremlin’s case against Mikhail Khodorkovsky, the jailed Yukos founder, who faced additional charges from prosecutors this year that he embezzled more than $32bn in company revenues and laundered the proceeds. The case, which critics say is aimed at keeping the Kremlin opponent behind bars beyond 2008, was contradicted by the numbers disclosed in the company’s GAAP accounts. The withdrawal will also weaken the hand of Yukos and its main shareholder, GML, in seeking restitution in international courts for the dismantling of Yukos. PwC said in a statement yesterday that its decision to pull the audits was “influenced by the fact that some former shareholders and management of Yukos are continuing to encourage others to rely on PwC’s audit reports”.