A federal judge in San Francisco dismissed charges against Big Four firm PwC, after a former employee had claimed the firm terminated him for blowing the whistle about conflicts of interest with audit clients.
In November 2016, former PwC employee Mauro Botta went to the Securities and Exchange Commission with claims that PwC offered clients favorable audits to retain their business. He was later fired. After a close to five-year battle, U.S. Magistrate Judge Alex Tse ruled that PwC successfully proved it terminated Botta due to a partially fabricated audit of semiconductor maker Cavium.
“Botta, in the end, simply didn’t put forward enough evidence to prove that his SEC complaint contributed to PwC’s decision to fire him,” Tse wrote. “The temporal proximity between his complaint and his termination generated suspicion, but at trial that suspicion wasn’t confirmed.”
Botta had been employed by PwC for nearly 16 years when he filed a confidential report with the SEC regarding the firm’s audit behavior. He highlighted two audits involving Cavium and tech company Harmonic, in which he claimed he detected accounting errors and internal control deficiencies that his supervisors deliberately overlooked.
PwC was notified in April 2017 by the SEC that the federal regulator would be investigating the two audits of Cavium. In response to the SEC, PwC enlisted the help of Walter Brown, a partner at law firm Orrick Herrington & Sutcliffe, to conduct an internal investigation. The SEC ultimately took no action.
“PwC proved that there was only one factor it considered in deciding to fire Botta — his violation of firm policy,” Tse wrote. “His SEC complaint wasn’t considered and so didn’t contribute to PwC’s decision to fire him.”
The judge did not rule on whether PwC provides favorable audits to clients in order to retain their business. Because the SEC remained silent on this claim, the Big Four firm has seen no consequences as a result of Botta’s initial claim. 