PwC Tough On AIG? Too Little Too Late

By • Feb 29th, 2008 • Category: Pure Content

When will the class action lawyers force AIG to fire PwC?

AIG’s acknowledgment of their exposure to writedowns in their derivatives portfolio came soon after their December disclosures that underestimated the losses. PwC, with their long, long relationship to AIG and the recent renewal of the relationship with the blessing of Levitt, are not so much tough as “scared witless.”

Derivatives are bothersome fellows, especially in a crazy market. There’s another client holding on to their longstanding auditor even though they can’t get the derivatives story straight either.

Do the Big 4 really have the expertise to judge their clients on this issue?

Insurance giant American International Group(AIG – Cramer’s Take – Stockpickr) said late Thursday it swung to a $5.3 billion loss in the fourth quarter thanks to $11.5 billion in writedowns on derivatives.

The company logged a net loss of $5.29 billion, or $2.08 a share, for the quarter, compared with earnings of $3.44 billion, or $1.31 a share, for the year-ago period. Excluding special items, AIG said it lost $3.20 billion, or $1.25 a share, compared with last year’s earnings of $3.85 billion, or $1.47 a share.

Analysts on Wall Street were expecting earnings for the quarter of 60 cents a share, according to consensus estimates reported by Thomson Financial.

The company said its results included a writedown of $11.47 billion on mark-to-market losses in its super senior credit default swap portfolio. Earlier this month, AIG disclosed in a regulatory filing that its auditor, PricewaterhouseCoopers, concluded it had “a material weakness in its internal control” related to its accounting for that portfolio.

That stood out in stark contrast to the company’s assurances in December that it had “little to no exposure” to asset-backed commercial paper, structured investment vehicles or collateralized debt obligations tied to residential mortgage-backed securities. It reported a $4.88 billion writedown in gross market value for its credit default swap portfolio in October and November — more than four times the $1.15 billion executives reported earlier.

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8 Responses »

  1. It’s too late to apologize, it’s too late
    I said it’s too late to apologize, it’s too late

    -Timbaland

  2. The answer to the question in the blog:

    Do the Big 4 really have the expertise to judge their clients on this issue?

    Seems rather obvious.

    The reality is that no one does. We need a new disclosure model.

    Final Four Guy

  3. […] gave PwC credit at the time for “getting tough with AIG.” I called the actions by PwC “too little too late” and a clusterschmuck. Why was PwC still AIG’s auditor?  Afterall, they were being sued by […]

  4. […] a few months later, they can tell AIG what a screw-up they’ve been. In my opinion, it’s too little too late.  But what’s really going on […]

  5. […] a few months later, they can tell AIG what a screw-up they’ve been. In my opinion, it’s too little too late. But what’s really going on […]

  6. […] a few months later, they can tell AIG what a screw-up they’ve been. In my opinion, it’s too little too late. But what’s really going on […]

  7. […] a few months later, they can tell AIG what a screw-up they’ve been. In my opinion, it’s too little too late. But what’s really going on […]

  8. […] Cassano did tell PwC all about the Financial Products Group activities, and AIG told PwC about all of their control issues throughout 2007 and prior, what are the legal implications for PwC? PwC knew about and blessed AIG’s subterfuges […]

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