UPDATE: OPI Finance receiver lashes Crowe Horwath over OPI settlement details
(Recasts with PwC comment)
By Paul McBeth
Sept. 18 (BusinessDesk) - Accounting firm PwC has taken the rare step of chastising another member of its own industry,
ASX-listed Crowe Horwath, for understating by half the value of a settlement reached over the auditing of OPI Finance in
the failed finance company's receivership and breaking a confidentiality agreement on the deal.
PwC, receivers for OPI Finance, said the settlement with Crowe Horwath was for $12.5 million, not the $6.25 million the
firm claimed in a statement to the ASX yesterday. Crowe Horwath became liable for the settlement through its acquisition
of Lower Hutt-based accounting firm Sherwin Chan & Walshe, which audited OPI Finance, prior to its collapse in
The deal is conditional on the payment being made in full, and since that hasn't happened, the claim hasn't been
released, PwC said.
"The settlement agreement contains a confidentiality provision which prevented the parties making any immediate
announcement about the settlement," PwC said. "OPI considers that the announcement was inaccurate and in breach of the
Crowe Horwath said it had settled the claim by OPI receiver Colin McLoy of PwC, which was seeking $45.4 million plus
A$35.4 million, any additional losses assessed by the court, as well as interest and costs. The claim, which will be
recognised in Crowe Horwath's first half financial statements, was "settled on commercial terms," it said.
Shares of Crowe Horwath fell 2.4 percent to 41 Australian cents on the ASX.
When the claim was lodged in August last year, Crowe Horwath said in a statement to the ASX the audit was investigated
by the New Zealand Institute of Chartered Accountants in 2009 and no action was taken, and that the firm also assisted
the Financial Markets Authority's investigation in September 2011, which also didn't result in any action against the
In November, the regulator went on to charge former OPI Pacific directors Mark Lacy, Jason Maywald, David Anderson and
Craig White under the Securities Act with making untrue statements in the 2007 offer document. Lacy, White and Anderson
entered not guilty pleas in June, and the National Business Review yesterday reported a hearing set down for Sept. 17
was adjourned to consider whether the High Court was more appropriate to hear the case.
In March, Justice Robert Dobson turned down a bid by Sherwin Chan & Walshe for a partial strike out of the receiver’s claim that the auditor breached its obligations in relation to the
lender’s 2007 financial statements, while saying testimony by a former executive could frustrate the claim. The hearing
was in the High Court in Wellington.
OPI's receiver claimed that if the audit had been completed competently, the lender would have stopped trading earlier,
which would have prompted directors to exercise a put option requiring Octaviar to pay OPI, then known as MFS Pacific
Finance, the $61.6 million face value of loans in arrears rather than the $23.1 million payment made under the option.
The finance company went into receivership in September 2009 after a 16-month moratorium and was put into liquidation in
November 2011. At the time of the receivership it owed almost 11,000 investors about $256 million, of which 3.25 cents
in the dollar has been repaid, on top of the 22.19 cents investors received during the moratorium.