Accounting Liability

Davis Polk has one of the country’s leading practices in the representation of public accounting firms, accountants and other professionals in investigations before the SEC, Public Company Accounting Oversight Board (PCAOB), other regulatory bodies and the stock exchanges, as well as in professional liability, securities and other litigation. Such matters often join allegations of professional negligence with allegations based on securities or bankruptcy law.

Our litigators have extensive experience in the application of professional standards – including the PCAOB Auditing Standards and Rules, Generally Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAAS), and SEC regulations and interpretations – and various federal and state laws to accounting firms.

Recognizing our lawyers’ deep understanding of our clients and the accounting profession, each of the major accounting firms (and their predecessors and affiliates) has turned to Davis Polk for counseling and representation when faced with serious and complex matters.

Notable Matters

  • We represented PwC in MDL proceedings in the U.S. District Court for the District of New Hampshire in connection with cases filed by state pension funds arising out of alleged fraud by Tyco’s former management.

  • We represented a major accounting firm in connection with an accounting-related SEC investigation of a Fortune 100 Company that resulted in a large company settlement but no action against our client.

  • We represented Deloitte in connection with several Parmalat litigation matters, including a shareholder action in the federal court of New York, and actions brought by trustees acting on behalf of creditors of two Parmalat subsidiaries. We won dismissal of the claims brought by non-U.S. purchasers of Parmalat stock in the shareholder action, which substantially reduced any recoverable damages in the case; and a settlement has been agreed upon in the case. In addition, we won dismissal of two lawsuits by the trustees alleging fraud and other common law claims, decisions that were affirmed on appeal by the Second Circuit.

  • We represent a major accounting firm in connection with an SEC investigation related to accounting issues at a Fortune 50 Company.

  • We represented PwC US in connection with litigation arising from alleged options backdating at a number of companies nationwide.
  • We represent an international accounting firm in an investigation by the New York Department of Financial Services relating to advisory services provided to a foreign bank.

  • We represented Deloitte in connection with a shareholder litigation, as well as criminal and regulatory proceedings, arising from a massive restatement by Royal Ahold, N.V. – the Dutch grocer and former owner of U.S. Foodservice – that was prompted by the discovery of two large-scale frauds. In 2008, we won dismissal of the civil suit against Deloitte and in 2009 we prevailed on appeal before the Fourth Circuit.

  • We won a motion to dismiss all claims against PwC in litigation arising out of losses allegedly suffered by one of Charles Schwab’s large investment funds on account of, among other things, the fund’s alleged investments in subprime-related assets.