Chip maker Emcore has filed a civil racketeering suit against PricewaterhouseCoopers (PWC) and ten of its executives, alleging that they violated basic auditing rules concerning stock ownership.
The US Securities and Exchange Commission (SEC) forced Emcore to fire the world's biggest accounting firm earlier this year because some of its partners owned Emcore stock at the time they were auditing the semiconductor manufacturer's books.
The suit claims that some of the PWC partners traded Emcore stock while the audits were taking place and that ethical violations by the firm unnerved Emcore stockholders, delayed Emcore's stock offering, resulted in a lower price for that offering and interfered with other business opportunities.
Emcore is seeking millions of dollars in damages.
But it has also filed the lawsuit against James Schiro, chief executive, Walter Ricciardi, the company's inhouse counsel and eight other partners, alleging that they owned approximately 140,000 Emcore shares during the period the firm was conducting Emcore's 1998 audit.
Specifically, the suit alleges that the conflict of interest created by the partners' ownership of Emcore stock put a secondary stock offering in jeopardy.
It claims that PWC repeatedly assured Emcore, both orally and in writing, that it was "independent" and the audit would be performed "in accordance with generally accepted auditing standards".
A PWC spokesperson said that Emcore filed the suit after its officials tried to "extort a settlement" from the company during a meeting, adding that all of the partners have since sold their Emcore shares.
"A new audit of Emcore's books by Deloitte & Touche found that the audits had been conducted properly," he claimed.
Emcore's suit follows other bad publicity for PWC earlier this year when it was censured by the SEC for auditor independence violations unrelated to Emcore. It is no longer the auditor for four of Fidelity Investments' top mutual funds because two consulting executives owned shares in one fund.
Emcore makes semiconductors out of compounds such as gallium arsenide, indium phosphide and gallium nitride, which are used in a broad range of commercial devices such as high speed transistors for cellular phones, solar cells for satellites and laser diodes for CDs and DVDs.
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