Related topics

SEC Bars PricewaterhouseCoop Partner

August 14, 2003

WASHINGTON (AP) _ Authorities will not press criminal charges against PricewaterhouseCoopers for its auditing of troubled Tyco International Ltd., but a partner in the firm’s Boston office is being barred for allegedly issuing fraudulent audits ``recklessly.″

As part of a settlement announced Wednesday with the Securities and Exchange Commission, Richard Scalzo agreed to be permanently barred from auditing public companies. Scalzo, a partner in PricewaterhouseCoopers’ Boston office, neither admitted nor denied wrongdoing and will not have to pay any fines. The firm has also left him in his position.

The SEC had alleged in an administrative proceeding that Scalzo, who oversaw Tyco’s audits for fiscal years 1997 through 2001, ``recklessly violated″ the antifraud provisions of the securities laws and engaged in improper professional conduct.

``Multiple and repeated facts provided notice to Scalzo regarding the integrity of Tyco’s senior management and ... Scalzo was reckless in not taking appropriate audit steps in the face of this information,″ the SEC said.

Scalzo’s attorney, Richard Spinogatti, declined to comment on the case.

Manhattan District Attorney Robert Morgenthau, whose office has been investigating the firm’s audits as well as Tyco itself for the past year, said Scalzo’s behavior was not up to professional par but also did not rise to criminal levels.

Morgenthau’s office has filed criminal charges against former top executives of Tyco, has obtained grand jury indictments and has moved to freeze hundreds of millions of dollars of their assets.

Bermuda-based Tyco has been trying to clean up its balance sheet and right itself since last year, when a criminal investigation led to a federal indictment against former CEO Dennis Kozlowski. Kozlowski, former chief financial officer Mark Swartz and former chief counsel Mark Belnick have all pleaded innocent to charges of looting the conglomerate of hundreds of millions of dollars.

On Tuesday, a state judge in New York City refused to throw out a grand larceny charge against Belnick, who is accused of accepting a $12 million bonus in 2000 in exchange for persuading the SEC to end an investigation into accounting problems at Tyco. The judge also declined Belnick’s request to dismiss six other counts that accuse him of falsifying business records.

PricewaterhouseCoopers, one of the Big Four accounting firms, has recently defended its audits of Tyco. Last month Tyco _ which makes a range of products including coat hangers, trash bags, sophisticated medical devices and electronic circuitry _ restated its financial results back to 1998. Before the restatement, PricewaterhouseCoopers auditors had advised the company that one wasn’t needed, but they were overruled by the SEC.

David Nestor, a PricewaterhouseCoopers spokesman, said Wednesday that Scalzo is remaining a partner of the firm.

``Mr. Scalzo has agreed to an SEC settlement. We support and respect his decision,″ Nestor said. ``We continue to stand behind the work we did for Tyco and to believe it was in accordance with professional standards in place at the time.″


On the Net:

Securities and Exchange Commission: http://www.sec.gov

PricewaterhouseCoopers: http://www.PwC.com

Tyco International: http://www.tyco.com

Update hourly