Cattles launches damages claim against PwC

PwC has said it will “vigorously” defend itself after Cattles launched a claim for damages against the accountancy giant.

The High Court action by the lender acuses PwC of allegedly failing in the way it audited Cattles’s accounts.

In a statement, PwC said: “We are disappointed that this claim has been issued given the FSA’s censure of the company for market abuse as well as the FSA’s conclusion that certain directors of Cattles plc were found to have acted without integrity in discharging their responsibilities. 

“This is an inflated and misguided claim and, as we have made clear before, we will vigorously defend our work.”

Cattles was a FTSE 250 company specialising in sub-prime lending but it got into difficulties when accounting irregularities were uncovered, revealing that it had been understating its bad debts and overstating its profits.  
The company’s shares were suspended in April 2009. Cattles left the stockmarket in 2011 after its shares were bought by Bovess.

The claim against PwC by Batley-based Cattles and its subsidiary Welcome Financial Services accuses PwC of negligently auditing its 2006 and 2007 financial statements. As a consequence, Cattles claims the financial statements misstated the financial position of the group and cost it more than £1.6bn.

Cattles said: “After a thorough, independent and objective review of the merits of this claim, it is clear to us that PwC were negligent in their role as auditors,” said a spokesman for Cattles.
“As a consequence, Cattles and its creditors suffered very significant losses. It is therefore in the best interests of the creditors of Cattles that this claim is properly pursued to enable creditors to be appropriately and fairly compensated.”

The Financial Services Authority (FSA) fined and banned two former directors of Cattles and its subsidiary Welcome Financial Services last March for publishing “misleading information” to investors.

Cattles claims that it continued to lend for two years untuil 2009 when it should not have done so as PwC “fundamentally mis-stated” its finances.