Monday, May 14, 2007

PricewaterhouseCooper LLP - legally off the backdating hook?

PricewaterhouseCoopers LLP (PwC) wants to be dismissed as a defendant in the amended complaint of the Rambus Inc. securities litigation. The PwC motion includes such gems as:

Statute of limitations - plaintiffs are too slow in asking the court for relief. This is the escape hatch that may used by a bad actor who is clever or fortunate enough to have bad behavior remain undiscovered long enough so as to escape justice in this dimension. High fives all around the office and the E & O carrier sighs in relief.

Failure to allege sufficient facts - establishing a strong inference of fraudulent scienter (mental state characterized by an intent to deceive, manipulate, or defraud) by PwC. It is not enough to allege that PwC failed to notice and report the backdating of the options. Mere incompetence (if present) is not the same a fraudulent scienter. Ramboids, if you think the auditor was incompetent, check the appropriate box before mailing in your proxy.

PwC statements are primarily statements of opinions not statements of fact. This is exactly what the average investor thinks about an auditor's opinion- that it is an opinion that is not worth the paper it is written on . . . certified public accountants wonder why few tears are shed when their firms are hit with lawsuits.

There's more, like the allegation PwC makes that the Lead Plaintiff wasn't harmed . . . "mean trading price of Rambus stock in the statutory bounce-back period following the alleged corrective disclosures was greater than the price at which the Lead Plaintiff purchased his stock." (Page 19, beginning at line 5)

Maybe Rambus Inc. should backdate another $200 million worth of options if it makes the price of the stock climb . . . .

Read the PwC motion at linked here.

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