Fabian Ledgister, Staff Reporter
THE DEFUNCT Caribbean Steel Company Limited was awarded $13,849,000 in a law suit brought against auditing company PricewaterhouseCoopers (PwC) and filed in 1998.
The suit related to work done in October 1994 on the share valuation of Caribbean Cable by the auditing company which led to the investment in Caribbean Cable amounting to $32 million in shares and $6.5 million in loans.
On May 24, 2006, the Supreme Court handed down judgement in Caribbean Steel's favour, in the sum of $13,849,000 plus interest at 24.5 per cent per annum from January 1995 to May 2006.
This figure may be subject to change, however, as PwC has indicated it will immediately be appealing the court's verdict on one of the suits.
"We are surprised at this judgement in the matter of Caribbean Cable, and we have already instructed our attorneys to file an appeal," said PwC's territory senior partner, Everton McDonald.
A second lawsuit was also filed against PwC in 1998 by Carib Steel for the alleged negligence in the preparation of the 1995 accounts of Caribbean Steel Company Ltd. This matter was settled out of court, to the tune of $40 million.
"The original claim by Carib Steel Company was $700 million by the time we got to court," said Mr. McDonald.
He said the company's reasons to settle, after taking into account the legal costs, were based on the added distraction that that case would have had on their regular professional work.
"Even if we continued with the trial, it became clear that no matter who won, the other party would appeal, so after considering legal costs and the distraction to our regular professional work along with other factors, we decided to settle," he said. The settlements were arrived at without any admission of liability on the part of PwC whatsoever.
In a release sent to the Financial Gleaner, former chairman and major stakeholder of Caribbean Steel Company limited, Richard Lake assured that the company will make good on its promise to reimburse shareholders and receivers, after legal costs are paid.
"In the filing of the two suits against PriceWaterhouse, it was agreed with the receivers that if Caribbean Steel were to be successful in proving negligence by the auditors or receive a settlement, any sums awarded to Caribbean Steel would be shared between shareholders and the receivers after reimbursement of legal expenses," he said in the release.
Lake told the shareholders in a meeting last Thursday, that legal fees would take up $12 million in the distribution of the $40 million settlement. He said $14.5 million would go to the shareholders and $13.2 million would go to the receivers.
For Caribbean Steel shareholders, the company's allocation would amount to 10.5 cents per share.