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pwc washes hands of centro scandal...

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    PwC washes hands of Centro scandal
    By Anthony Klan
    February 19, 2008 12:00am

    AUDITOR PricewaterhouseCoopers has broken its silence over its role in the failing Centro property empire, in an apparent attempt to distance itself from a series of false financial reports.

    Two months after Centro Properties Group and Centro Retail Trust suffered share price meltdowns, PwC yesterday said it would review why Centro "changed the classification of current and non-current debt".

    "PwC will consider in its current review of Centro's half-yearly accounts the basis on which Centro Properties Group and Centro Retail Trust have changed the classification of current and non-current debt," the group said in a prepared statement.

    The move comes as Centro on Friday increased by $1.5 billion to $2.61 billion the reported value of short-term debt it held at June 30.

    That restatement was the third different figure the group has provided to the market regarding its short-term debt in the past five months, with Centro in August last year originally claiming the company had no short-term debt at all.

    Claims of incompetence

    Australian Shareholders Association president Stephen Matthews said Centro's repeated failure to properly disclose its debt was "appalling".

    "The auditor has signed off on these accounts, Centro's former chief executive Andrew Scott and the group's audit risk committee headed by Sam Kavourakis signed off and the other directors signed off," Mr Matthews said yesterday. "It seems almost unbelievable it's an innocent mistake."

    Mr Matthews said PwC also had "a lot to answer for" to Centro shareholders about how it came to the conclusion there were no material misstatements in the group's accounts.

    In its unaudited June 30 accounts, released in August, Centro told the market it had no short-term debt (debt expiring within 12 months).

    In December, when queried by the Australian Securities Exchange, Centro announced it had incorrectly classified $1.096 billion of short-term debt as "non-current" in its June 30 accounts, released in September.

    That June 30 "error" masked a $450 million funding hole, which would have shown Centro was unable to pay its short-term debts.

    Debt fears growing

    Last month Centro told the market its revised level of short-term debt "may have been higher than that reported" in September.

    Last Friday night, as part of a broader statement announcing Centro had been granted a reprieve on its short-term debt by a syndicate of US and Australian banks, the company said its short-term debt at June 30 had been $2.61 billion.

    Centro's second restatement of debt is likely to provide further ammunition to class action lawyers who are circling Centro on behalf of shareholders who claim to have been misled by Centro's incorrect debt classification.

    Slater & Gordon associate Ben Phi said the law firm was "continuing investigations" into Centro and was "keenly awaiting" the release of Centro's mid-year accounts, due for release on February 28.

    Both PwC and the Australian Securities & Investments Commission have come under pressure to discuss Centro's failure to properly account for its debt.

    It is a company's duty to provide correct information to shareholders, while auditors are paid -- in the case of PwC and Centro $1.8 million last year -- to check reported figures are accurate.

    PwC would not comment further on Centro yesterday but the auditor is expected to further explain its role in Centro's repeated false debt statements when Centro releases its half-year results.

    ASIC continues to decline to comment about Centro.

    However, as revealed by The Australian, the regulator has held discussions with the group -- which is being represented by law firm Clayton Utz.


    Cheers, Pie :-)
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