Hong Kong Media: China Evergrande's Liquidators Seek Massive Compensation from PwC

(CNA, Hong Kong, May 19, by reporter Cheung Him) Hong Kong's Sing Tao Daily reported today that the liquidators of Chinese property developer Evergrande Group are seeking 57 billion RMB (approximately 256.5 billion NTD) in compensation from PricewaterhouseCoopers (PwC), one of the highest amounts in a corporate claim case in Hong Kong's history. Evergrande, which is listed in Hong Kong, was ordered into liquidation by a Hong Kong court due to a debt crisis and allegations of exaggerating revenue and falsely reporting profits. According to the report, Evergrande's then-auditor PwC allegedly "turned a blind eye" or even "assisted in fraud" during the audit process, and has previously faced over 1.7 billion HKD (approximately 6.8 billion NTD) in fines and compensation in Hong Kong and mainland China. Furthermore, Evergrande's liquidators filed a lawsuit in the Hong Kong High Court in 2024, seeking 57 billion RMB from three PwC entities. According to a compilation of local media reports, the liquidators are seeking compensation from former auditors PwC Hong Kong, PwC China, and PwC International. The trial for this claim began yesterday. According to reports, a lawyer representing PwC International stated that the audit of Evergrande's financial data at the time was conducted by the PwC China and Hong Kong member firms, and that PwC International did not serve as Evergrande's auditor, applying to the High Court to be removed from the list of defendants. A lawyer for Evergrande argued that PwC International was responsible for setting standards and rules but failed to exercise a supervisory role over its member firms. The report stated that after hearing arguments and responses from lawyers for both sides, the judge announced that a written judgment on whether to remove PwC International would be issued within three months. At the end of last month, the Hong Kong Securities and Futures Commission (SFC) announced that it had reached an agreement with PricewaterhouseCoopers Hong Kong (PwC HK), in which PwC HK agreed to set aside 1 billion HKD for compensation to Evergrande's eligible independent minority shareholders. At that time, the SFC stated that PwC Hong Kong had audited Evergrande's financial statements for the 2019 and 2020 fiscal years, and the SFC found that Evergrande had significantly overstated its revenue and profits for these two fiscal years. After reviewing PwC Hong Kong's role in the incident, the SFC concluded that market misconduct had occurred due to Evergrande's dissemination of false and misleading financial information and the auditor's serious breach of its professional responsibilities. China's real estate market experienced a debt crisis several years ago, and Evergrande was the first to collapse and had the largest debt. It is currently in liquidation. (Editor: Chou Hui-ying) 1150519