PwC Must Face Trial Over SemGroup Collapse

, The Litigation Daily


After a ruling last week, lawyers at Kirkland & Ellis face the daunting task of convincing a Tulsa jury that PricewaterhouseCoopers shouldn't have to pay for "one of the most egregious instances of auditor malpractice in Oklahoma history."

In a Jan. 30 decision, Tulsa County District Court Judge Dana Kuehn largely denied PWC's motion for summary judgment in the case, which was brought by the litigation trustee of the bankrupt energy transport company SemGroup. Although the judge did knock out breach of fiduciary duty claims against PwC, she mostly sided with the trustee's lawyers at Quinn Emanuel Urquhart & Sullivan and left the allegations against the auditing firm intact ahead of a scheduled August trial.

The trustee, Bettina Whyte, sued in 2010, claiming that PWC's audits failed to unearth self-dealing and speculative trading by SemGroup's founder and CEO, Thomas Kivisto. Kivisto's bad bets on the future price of oil ultimately bankrupted the company, the complaint alleged, but "rather than sounding alarm bells, PwC issued unqualified opinions in support of the company's financial statements year after year." The complaint alleges that PwC's conduct caused "SemGroup and its stakeholders to suffer billions of dollars in damages."

Emily Nicklin and Gabor Balassa at Kirkland are representing PwC in the case. Neither was immediately available on Monday, and a spokesman for PwC also didn't immediately respond to a request for comment.

The trustee's lawyers at Quinn Emanuel said they were eager to take the case to trial. "There are literally thousands of beneficiaries of the SemGroup litigation trust who reside in and around Tulsa who are looking forward to having their day in court," said Quinn partner Brian Timmons.

As we previously reported, Barclays Bank and its lawyers at Sullivan & Cromwell had better luck in fending off claims stemming from SemGroup's collapse. In November 2012 U.S. District Judge Jed Rakoff in Manhattan dismissed the SemGroup litigation trustee's claim to $143 million the company had paid the bank to take over its commodities trading positions prior to SemGroup's 2008 bankruptcy filing. Counsel from Reid Collins & Tsai represented SemGroup's bankruptcy trustee in that matter.

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