- The Washington Times - Sunday, October 19, 2003

PricewaterhouseCoopers LLP is threatening to sue a British arm of Washington-based Watson Wyatt & Co. Holdings Inc. for its role in the collapse of a major insurance provider, a newspaper in London said yesterday.

The Sunday Telegraph said PricewaterhouseCoopers, the world’s largest accounting firm, notified actuary Watson Wyatt LLP and rival accountant KPMG International that it could sue for negligence in connection with the bankruptcy of Independent Insurance Group PLC.

PricewaterhouseCoopers is overseeing the liquidation of Independent Insurance, which voluntarily shut down in June of 2001 after admitting to massive losses stemming from insurance claims that had not been adequately reported. Watson Wyatt was Independent’s external actuary at the time. KPMG was the company’s auditor.

Watson Wyatt LLP is legally separate from Watson Wyatt & Co. Holdings, a human resources consulting firm with headquarters in Washington, but the two share resources and have investments in one another.

News of the potential legal action was also reported last week in the Post Magazine, a British insurance trade publication.

According to the Telegraph, PricewaterhouseCoopers told Independent’s creditors that Watson Wyatt and KPMG had been notified that there was a “reasonable chance” PricewaterhouseCoopers would bring a negligence claim against the two companies. The claims could amount to “hundreds of millions of pounds” according to the Telegraph.

Directors at Independent Insurance failed to pass on a letter from Watson Wyatt warning of Independent’s financial problems in May 2001, the Telegraph reported at the time. Independent stopped accepting new business and began liquidating one month later.

Representatives from PricewaterhouseCoopers and Watson Wyatt did not return phone calls requesting comment yesterday, but Watson Wyatt did issue a statement to the Telegraph.

“We are aware that [PricewaterhouseCoopers] may be taking such action,” the company said. “We believe that if they did so, they would be making a mistake and we would contest it vigorously.”

Shares of Watson Wyatt & Co. Holdings fell 23 cents Friday to close at $23.35 on the New York Stock Exchange. Watson Wyatt LLP is privately held.

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