OUTLOOK & ANALYSIS

Auditors Beware: Parmalat Suit Against Deloitte Gets Green Light

“Shock waves.”

Stuart Grant of Grant & Eisenhofer tells Andrew Longstreth at American Lawyer that the Manhattan federal district court ruling to allow a Parmalat shareholder case to move forward against Deloitte & Touche LLP is “sending shock waves throughout the auditor community.”

Granted, he represents Parmalat shareholders, but we get his point. We’re sure that Pricewaterhouse Coopers, whose India affiliate audited Satyam’s books, does too.

Critically, Judge Kaplan ruled that the two Deloitte entities (DTT and D&T) could be held vicariously liable for the actions of Deloitte & Touche SpA, which served as Parmalat’s auditor in Italy before a major accounting scandal forced the dairy giant into bankruptcy in 2003. The two entities filed separate summary judgment motions. Deloitte & Touche Tohmatsu argued that it did not have control over Deloitte Italy, and Deloitte & Touche LLP, the accounting giant’s U.S. operation, claimed that it did not control Deloitte & Touche Tohmatsu. Judge Kaplan disagreed with DTT’s argument and ruled that the question of Deloitte & Touche’s control would have to be decided at trial.

“In essence, Judge Kaplan has said that the parent can’t hide from the misdeeds of its children,” said Grant.

FREE DOWNLOAD: Get the judge’s decision (PDF, 30 pages)

via AmLaw

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3 Responses to “Auditors Beware: Parmalat Suit Against Deloitte Gets Green Light”

  1. Rick Telberg

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  2. Kirk Ward

    This decision is as it should be.

    There are too many “sophistcated” uses of the corporate veil used to reduce liability that it has to stop somewhere.

    Roll on Judge Kaplan, roll on!

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