PHOENIX -- An Arizona jury has ordered Price Waterhouse to pay $338 million to Standard Chartered PLC for negligence related to audits.
The audits were of United Bancorp of Arizona before Standard Chartered bought it in 1987.
The award is believed to be the largest ever levied against an accounting firm.
Price Waterhouse called the verdict "completely contrary to the evidence" and said it would seek a new trial, citing "material errors [by the judge] in interpreting the law and instructing the jury."
"We have substantial insurance coverage, exceeding $100 million, but not enough to cover the full amount of the verdict," said Erica Baird, a special assistant to Price Waterhouse's chairman. "We don't believe we will ever have to pay this judgment."
No Punitive Damages
The verdict against Price Waterhouse, the nation's sixth-largest accounting firm, did not include punitive damages.
Marc Galanter, a University of Wisconsin law professor who studies litigation patterns but has not followed the Price Waterhouse case, said U.S. appellate judges "typically cut punitive damages in half or maybe more." But they are "less inclined to second-guess juries when it comes to compensatory awards," he said.
Even if the award were eventually reduced, however, partners in the firm would have to pay whatever isn't covered by insurance, using their own capital. This could hamper the firm's ability to do business, particularly in taking on large consulting contracts and audits of big multinational corporations.
Coopers Assails Verdict
Eugene M. Freedman, chairman of Coopers & Lybrand, another major accounting firm, decried the Price Waterhouse verdict as "another example of an American tort system that is out of control and out of touch with economic reality."
Recent judgments against accounting firms, which paid about $477 million in litigation costs last year, "place the profession at serious risk," Mr. Freedman added.