PwC settled their legal dispute with BAT. Photo credit: BAT
PwC reportedly compensated British American Tobacco £132 million due to a flawed audit involving a BAT subsidiary accused of discharging toxic chemicals into two rivers in the US, according to The Sunday Times.
BAT sought over £600 million from PwC, alleging a “negligent” audit of Windward Prospects, a paper manufacturing division previously owned by the tobacco company. BAT claimed this flawed audit caused Windward to violate its commitment to cover environmental cleanup costs.
Now in administration, Windward was accused of releasing hazardous chemicals used in carbonless paper production into rivers in Wisconsin and Michigan. Although Windward was spun off by BAT in 1990, BAT maintained that it had agreed to handle the cleanup expenses. Between 2008 and 2009, Windward distributed two dividends totaling about £488 million, which BAT argues should have been set aside for remediation. The company alleged that these dividends were made possible by PwC’s negligent auditing, leading to Windward breaching its indemnity obligations.
BAT terminated its 17-year relationship with PwC as its auditor in 2015, when their legal dispute started.