[ by Melanie Gretchen ]

MF Global customers won't back down.

Former clients of MF Global Holdings Ltd's broker-dealer have turned their legal wrath on PricewaterhouseCoopers LLP (PwC), when they added the accounting firm as a defendant in a lawsuit stemming from the collapse of the brokerage.  What's at stake is whether PwC acted properly or negligently to protect customer funds.

Lawsuit Findings and Allegations. PwC was an independent auditor of MF Global in 2010 and 2011, the year the company went bankrupt, according to the complaint.  In an amended complaint filed in U.S. District Court in Manhattan earlier this week, MF Global customers:

• accused PwC of failing to adequately audit MF Global's internal controls over customers funds, which led to professional malpractice and a breach of the auditors' duties to the company and customers
• repeated prior accusations against former officials at MF Global, including CEO Jon Corzine, who is accused of violating the Commodity Exchange Act, restricting the use of customer funds

In its defense, a PwC spokeswoman said it conducted its last audit of MF Global in 2011 "in accordance with professional standards."  The accounting firm's audit confirmed that MF Global had maintained its customer accounts in accordance with federal regulations.

Nevertheless, the lawsuit is seeking class action status, which, if decided in the clients' favor, would make MF Global vulnerable to further lawsuits. 

"If PwC had properly executed its duties and evaluated and reported on [MF Global]'s control probelms in March, there would have been ample time for management to institute proper controls over customer funds." -- the complaint.

The case: DeAngelis et al. v. Corzine et al, U.S. District Court, Southern District of New York, No. 11-07866.

For further details, go to [Reuters, 11/5/12].