Danny McCance 24 Dec 2018 12:06pm

Providence administrators sue PwC for £14m

The administrators of Guernsey-based investment fund Providence have launched a legal action against auditors PwC for allegedly failing to spot that the fund was a “Ponzi scheme”

The administrators of Providence Investment Fund (PIF) are pursuing the Big Four firm for £14m for “negligence, breach of duty and breach of contract as auditors,” according to reports.

“The allegation made by the fund (acting by its administration managers) is that PwC [the fund’s auditors] ought to have realised that the fund was, in effect, being used as a Ponzi scheme, and should have taken sufficient action from that point to prevent the fund suffering further losses,” said lawyer Mathew Newman, who is representing the administration managers.

In April this year, former CEO of Providence Holdings International and principal of PIF Antonio Carlos de Godoy Buzaneli, pleaded guilty to orchestrating a $150m (£119m) investment fraud scheme and conspiracy to commit mail fraud.

At the time US attorney Greg Brooker said that Buzaneli and co-conspirators “lured their victims with the promise of novel international investments and huge financial returns” adding that in reality they used the stolen money to fund personal interests and maintain the conspiracy.

In August 2016, the Guernsey Financial Services Commission issued a statement that PIF had been put into administration and that Deloitte were appointed as managers.

According to reports, investors lost approximately £37m in the scheme.

Newman said, “It is public knowledge that the claim is subject to litigation funding, but we do expect a proportion of any net recoveries to be paid back to investors in the fund.”

“We are disappointed that this action has been brought,” a PwC spokesperson said.

“We believe the claim is misconceived and will vigorously defend our position.”