PriceWaterhouseCoopers was fined US $25 million and suspended from accepting certain consulting engagements at financial institutions overseen by the NY State Department of Financial Services (DFS) for its issuance of a report to the DFS in 2008 that failed to disclose certain wrongful conduct by its client, Bank of Tokyo Mitsubishi. In 2013, the bank’s NY branch had agreed to a consent order with the DFS related to improper payments involving Iran, Sudan, Myanmar and certain entities on the US Department of Treasury’s specially designated national list. In agreeing to this settlement, the regulator had relied on the report issued by PwC about the bank’s practices that it considered “the product of an objective and methodologically sound process.” However, claims the regulator, the PwC report failed to include certain adverse information about its client that PwC had included in a draft report, but that its client had requested be removed from the final report submitted to the DFS.
My View: With all respect to Shakespeare, “to include or not to include” is really the important question these days for many professionals advising financial service firms or working within such entities in compliance or other control functions. Outside advisers engaged to issue reports to management regarding conduct that might be contrary to law, or internal staff required to author annual compliance or other control-oriented reports, must struggle between what they see, hear, and conclude, and how they write it, and the views of some management that may want a different emphasis in an official publication. These different perceptions can lead to tough discussions. In the end, however, a firm with a strong compliance culture will not seek to avoid accurate descriptions of facts being included in official documents no matter how embarrassing or how adverse the consequences of such disclosure may be.