Controversy Brews over PWC's Audit Independence

August 5, 2002 (PLANSPONSOR.com) - Now that IBM has just shelled out $2.7 billion for PWC's consulting business, several institutional investors are now questioning if PricewaterhouseCoopers LLP (PWC) can still perform audits free of IBM influences.

Among the critics is New York Comptroller H. Carl McCall, sole trustee of the New York State Common Retirement Fund, which holds 5.6 million IBM shares, according to a Wall Street Journal report.

The California Public Employees Retirement System (CalPERS) and TIAA-CREF Investment Management, which manages teachers’ pensions, line up with McCall. “IBM’s continued use of Pricewaterhouse as auditors will cast doubt about the independence of future audits,” McCall, a Democrat, told the Journal.

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For their part, PWC and IBM say they won’t have a problem. IBM officials say the computer maker is large and complex so they don’t want to lose PWC’s familiarity with their operations. The Securities and Exchange Commission (SEC) agreed.

The SEC’s decision this week not to challenge IBM’s retention of PricewaterhouseCoopers came in the form of a “no-action” letter signed by SEC Chief Accountant Robert Herdman.

The H-P Deal

Nearly two years ago, when PricewaterhouseCoopers was in talks with Hewlett-Packard Co. to sell the same consulting unit for $18 billion, the then-chairman of the SEC, Arthur Levitt, advised H-P to terminate PricewaterhouseCoopers as its auditor, which it did.

In the IBM matter, SEC staff members based their decision on certain distinctions between the proposed H-P deal and the one with IBM, noting the agency’s overriding interest in ensuring that the accounting firm get out of the consulting business.

For instance, the SEC noted that the accounting firm’s partners wouldn’t be receiving any stock, as they would have under the H-P deal that broke off in late 2000.

Other critics include Institutional Shareholder Services Inc., which advises large shareholders on proxy and corporate-governance matters.

State Street Acquires Part of UK's Gartmore

July 17, 2001 (PLANSPONSOR.com) - State Street Corp has bought the passive equity arm of UK fund manager Gartmore for an undisclosed amount.

Gartmore’s passive equity business has about $25.33 billion in assets under management, too little to compete with specialist passive managers such as Merrill Lynch, and about 50 institutional clients, which will be transferred to State Street.

Following the sale Gartmore plans to focus on active fund management and will look at expanding through non-organic growth, dependent on US parent company, Nationwide Mutual’s asset management strategy, and will likely seek to grow its hedge fund business.
 
State Street Global Advisors, the fund management arm of State Street, will see its UK assets under management jump to £41 billion, of which £32 billion will be passively managed.

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Although it plans to grow assets under management in the UK by between 40% and 50% per year, State Street Global Advisors is unlikely to undertake further acquisitions in the UK, according to the group.


 

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