The UK’s Financial Times cited sources as saying that the liquidators of China Evergrande Group have written to the Hong Kong partner of international accounting firm PricewaterhouseCoopers (PwC), holding them personally responsible for audit mistakes and explicitly warning against asset transfers through means such as divorce.
Evergrande Group was once China’s largest real estate company but went bankrupt in 2021 due to debt defaults, with debts exceeding $300 billion. Its collapse exposed the funding shortages in the entire Chinese real estate industry, leading to other developers also going bankrupt and causing significant impact on the Chinese financial system, as most Chinese households have a significant portion of their wealth tied up in real estate.
PwC was responsible for Evergrande’s audits from 2017 to 2020.
The Evergrande liquidators have filed lawsuits alleging “negligence” and “false representations” in Evergrande’s audit work and are seeking over $8.5 billion in compensation from PwC.
The Financial Times reported that a letter sent on June 30th warned PwC partners against taking actions to “evade judgment enforcement, including divorce or transferring assets to other family members.”
There have been reports that some partners are considering asset protection strategies to shield their personal finances from being implicated, with some even contemplating divorces to avoid compensation liabilities.
In the letter, Eddie Middleton and Tiffany Wong, liquidators from restructuring firm Alvarez & Marsal, expressed concerns about whether partners have made sufficient arrangements in their personal finances to cover claims from Evergrande without taking actions that would shield assets beyond Evergrande’s reach.
While the trial date has not been set and such litigation typically takes years to conclude, an individual familiar with the letter said the liquidators are “notifying” PwC partners that they “may seek some (compensation).”
In theory, the liquidators can only pursue compensation from individuals if Evergrande fails to fully pay the compensation. PwC declined to comment on the Financial Times’ request for comment.