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Gazprom: Russia's Enron?


As financial scandals go, this one has everything. A Big Five accounting firm accused of overlooking wildly improper deals in its probes of a client's books. A client that's one of the country's biggest energy firms, and yet is now a symbol for the evils of crony capitalism. The amounts involved? Billions and billions. There's more: leaked documents, infuriated shareholders, threatened lawsuits. Even the President of the country is angry.

Only one thing. We're not talking about Enron Corp. (ENE) No, the company at the center of this nasty tale is Gazprom (OGZPF), the biggest company in Russia, with sales of $20 billion in 2001, and one of the largest energy producers on the planet, with reserves six times the size of Exxon Mobil Corp.'s (XOM). The auditor in question is PricewaterhouseCoopers, the world's largest accounting firm. PwC has been signing off on Gazprom's books since 1996, and fed-up shareholders say it is high time to give the job to someone else. Together, Gazprom and PwC are at the center of a tempest whose resolution could determine whether corporate governance can ever take root in Russia.

Unlike Enron, Gazprom is not going bankrupt. But as with most stories involving Russia Inc., its tale is complex. In a nutshell, outsider shareholders accuse PwC of conducting dangerously lax audits of Gazprom, sheltering management from scrutiny over many questionable dealings, and depriving investors of vital information. Longstanding perceptions that investors were not being told the truth about the company's financial position have kept the stock price severely depressed. Depressed is right: Although its assets dwarf those of ExxonMobil's and despite a recent runup in the stock, Gazprom's market capitalization is only a twentieth of the U.S. energy giant's. "PwC missed egregious transactions that were obvious to everybody else and hurt shareholders," says Moscow fund manager William F. Browder, a 37-year-old former Salomon Brothers investment banker whose Russian investment fund, Hermitage Capital Management, has been buying Gazprom shares since 1996.

The problem is that Gazprom, renowned for its secrecy, is difficult to audit. But despite the apparent obstacles that PwC faced in getting information from management, the firm continued to sign off on the books anyway, says Gazprom independent director Boris Fyodorov, a former Russian Finance Minister who now runs investment banking firm United Financial Group. Why? To keep the account, he says. "If an auditor knows it cannot do a proper review, then it is just doing it for the money," says Fyodorov.

Gazprom won't comment. PwC says professional rules and its own policies prohibit it from discussing clients or commenting on its work for clients. One Moscow partner, however, says the firm is being faulted by critics who lack its grasp of Gazprom's inner workings.

Nonetheless, Gazprom shareholders will vote in June whether to retain PwC as auditor. Everything is coming to a boil right now because of a confidential document floating around Moscow, a copy of which was obtained by BusinessWeek. It's a review of PwC's auditing of Gazprom that PwC itself conducted last year--and which essentially finds nothing wrong with the Moscow office's work. PwC won't comment on the report. But Browder and others who have seen the document are up in arms over its findings.

Browder belongs to a community of Western investors who bought early into Russian stocks, betting that managers would make these companies more transparent and efficient. Now he wants to accelerate that process. A minority shareholder in Gazprom, he's running for a board seat on a platform of firing PwC. Browder is also exploring with Wall Street law firms the possibility of launching a class-action lawsuit against PwC in the U.S. on behalf of investors in Gazprom American depositary receipts. The hook would be that such investors purchased Gazprom ADRs on the basis of flawed audit opinions.

He may yet find a key ally in his fight to oust PwC. The Russian government owns a 38% stake in the company, which was enough to help it win control of the board last year. And none other than President Vladimir V. Putin is skeptical about the accuracy of the company's reports. "We know that enormous amounts of money were misspent," Putin told reporters last June.

The government has not tipped its hand about the vote on PwC. But Putin and his ministers are increasingly unhappy with the failure of auditing firms to identify misspending and improve transparency at Gazprom and other monopolies in which the government still has big ownership stakes. "Auditors have been working on behalf of management rather than shareholders," says Andrei V. Sharonov, a deputy minister at Russia's Ministry of Economics.

The Kremlin wasn't always so concerned about policing its shareholdings--let alone the rest of Russia Inc. Over the past decade it let Gazprom Chief Executive Rem Vyakhirev run the company as his fiefdom. That changed last year when Putin ousted Vyakhirev and replaced him with an aide, Alexei Miller, with a mandate to clean up Gazprom.

Right now it's PwC that's in the hot seat. The focus is the review the auditor did for the Gazprom board last year on ties between Gazprom and Itera, a Moscow-based gas producer. Suspecting that Gazprom management was using Itera as a front company for the improper transfer of assets, a shareholder faction led by Browder sought to engage Big Five auditor Deloitte & Touche to investigate Gazprom-Itera transactions. Gazprom management was dead set against bringing in Deloitte & Touche, says Fyodorov. According to PwC sources, even some senior partners in the firm's Moscow office argued that any self-review would lack credibility. But PwC ultimately decided to have a probe done by an in-house team headed by a London partner. PwC delivered the report to Gazprom's board last July. Copies of the report are now providing fresh ammunition to PwC's critics who want to fire the firm from the Gazprom account.

There seems to be plenty of gunpowder. Consider this convoluted example from the report. PwC's review team examined a deal in which the province of Yamal-Nenetsk accepted gas from Gazprom as payment in kind for $200 million in taxes. The regional authorities sold the gas for a very low price to Itera, which then resold the energy to customers outside Russia at what PwC in its report called a "significant profit."

Something doesn't sound right here. Why couldn't Gazprom itself have sold the gas to foreign customers for a rich price, paid off its regional tax bill, and pocketed the profit for its shareholders? The report concludes that in-kind payment of gas saved Gazprom from borrowing cash at high interest rates to pay taxes. But according to a Hermitage analysis based on data from Russia's Audit Chamber, a government watchdog, the company lost out on a $5.5 billion pretax profit by handing over the gas to Itera via the Yamal-Nenetsk tax transaction.

Then there's the PwC review team's analysis of asset transfers from Gazprom to Itera. PwC found that Gazprom sold Itera a 32% stake in a gas-producing subsidiary, Purgas, for just $1,200. PwC noted the market price could have netted Gazprom $400 million and determined the deal was "advantageous for Itera." Why was this defensible? PwC's answer: Gazprom, afflicted by cash shortages due to Russia's financial crisis, lacked funds to develop the Purgas field.

That's weird, since Gazprom at the same time had the financial means to help Itera with $616 million in loans, credit guarantees, and various services. Itera went on to become the fourth-largest gas company in the world. "I don't know how auditors could condone this," Christopher Weafer, head of research at Moscow brokerage Troika Dialog, says of the asset transfers. Faced with stonewalling from Itera, the PwC review team could not determine whether Gazprom managers were beneficiaries of Itera. The firm, however, defends its record. "Nobody has ever demonstrated anything" that proves management siphoned off assets to Itera and pulled off other dubious deals, says Keith R. Rowden, the PwC partner who has supervised the Gazprom account since arriving in Moscow last March.

Former Gazprom managers, meanwhile, deny owning any stake in Itera. Itera says it cooperated with PwC's review, but adds it does not have to tell PwC who gets dividends because PwC is not its auditor.

Another controversy centers on Stroitransgaz, a Moscow pipeline-construction company that landed more than $1 billion in contracts from Gazprom. Stroitransgaz disclosed in a February, 1999, filing with Russia's Federal Securities Commission that Gazprom managers and relatives, including Vyakhirev's daughter, owned more than 50% of the contractor. That ownership tie, along with a report that Gazprom managers had transferred a block of Gazprom stock to Stroitransgaz at a nominal price, was featured in a 1999 article by the Russian daily Moskovsky Komsomolets.

Gazprom investors and analysts started to do their own digging. But the 1999 Gazprom annual report, approved by PwC, did not mention any link to Stroitransgaz. "That you could attribute to a lack of required diligence on the part of the auditor," says Steven Dashevsky, an energy analyst at Capital Group Aton in Moscow. Gazprom execs have denied any wrongdoing. But under pressure from Fyodorov, Gazprom disclosed Stroitransgaz as a related party in its 2000 report. As for Vyakhirev, an aide says he is "retired" and "will not answer any questions."

PwC is helping another large client, Russian oil major Yukos, move toward greater financial transparency. But with respect to Gazprom, many are not inclined to give PwC the benefit of the doubt. The belief that Gazprom remains largely opaque is a big reason why the stock remains depressed. "New management will never know what happened if they don't use a new auditor," says Mattias Westman, director of Prosperity Capital Management, a Moscow fund. Shareholders would push any new auditor to reopen Gazprom's books and build a case for full restitution of the company's stripped assets. PwC's biggest job in Russia could yet prove its most painful. As financial scandals go, this one has everything. A Big Five accounting firm accused of overlooking wildly improper deals in its probes of a client's books. A client that's one of the country's biggest energy firms, and yet is now a symbol for the evils of crony capitalism. The amounts involved? Billions and billions. There's more: leaked documents, infuriated shareholders, threatened lawsuits. Even the President of the country is angry.

Only one thing. We're not talking about Enron Corp. (ENE) No, the company at the center of this nasty tale is Gazprom (OGZPF), the biggest company in Russia, with sales of $20 billion in 2001, and one of the largest energy producers on the planet, with reserves six times the size of Exxon Mobil Corp.'s (XOM). The auditor in question is PricewaterhouseCoopers, the world's largest accounting firm. PwC has been signing off on Gazprom's books since 1996, and fed-up shareholders say it is high time to give the job to someone else. Together, Gazprom and PwC are at the center of a tempest whose resolution could determine whether corporate governance can ever take root in Russia.

Unlike Enron, Gazprom is not going bankrupt. But as with most stories involving Russia Inc., its tale is complex. In a nutshell, outsider shareholders accuse PwC of conducting dangerously lax audits of Gazprom, sheltering management from scrutiny over many questionable dealings, and depriving investors of vital information. Longstanding perceptions that investors were not being told the truth about the company's financial position have kept the stock price severely depressed. Depressed is right: Although its assets dwarf those of ExxonMobil's and despite a recent runup in the stock, Gazprom's market capitalization is only a twentieth of the U.S. energy giant's. "PwC missed egregious transactions that were obvious to everybody else and hurt shareholders," says Moscow fund manager William F. Browder, a 37-year-old former Salomon Brothers investment banker whose Russian investment fund, Hermitage Capital Management, has been buying Gazprom shares since 1996.

The problem is that Gazprom, renowned for its secrecy, is difficult to audit. But despite the apparent obstacles that PwC faced in getting information from management, the firm continued to sign off on the books anyway, says Gazprom independent director Boris Fyodorov, a former Russian Finance Minister who now runs investment banking firm United Financial Group. Why? To keep the account, he says. "If an auditor knows it cannot do a proper review, then it is just doing it for the money," says Fyodorov.

Gazprom won't comment. PwC says professional rules and its own policies prohibit it from discussing clients or commenting on its work for clients. One Moscow partner, however, says the firm is being faulted by critics who lack its grasp of Gazprom's inner workings.

Nonetheless, Gazprom shareholders will vote in June whether to retain PwC as auditor. Everything is coming to a boil right now because of a confidential document floating around Moscow, a copy of which was obtained by BusinessWeek. It's a review of PwC's auditing of Gazprom that PwC itself conducted last year--and which essentially finds nothing wrong with the Moscow office's work. PwC won't comment on the report. But Browder and others who have seen the document are up in arms over its findings.

Browder belongs to a community of Western investors who bought early into Russian stocks, betting that managers would make these companies more transparent and efficient. Now he wants to accelerate that process. A minority shareholder in Gazprom, he's running for a board seat on a platform of firing PwC. Browder is also exploring with Wall Street law firms the possibility of launching a class-action lawsuit against PwC in the U.S. on behalf of investors in Gazprom American depositary receipts. The hook would be that such investors purchased Gazprom ADRs on the basis of flawed audit opinions.

He may yet find a key ally in his fight to oust PwC. The Russian government owns a 38% stake in the company, which was enough to help it win control of the board last year. And none other than President Vladimir V. Putin is skeptical about the accuracy of the company's reports. "We know that enormous amounts of money were misspent," Putin told reporters last June.

The government has not tipped its hand about the vote on PwC. But Putin and his ministers are increasingly unhappy with the failure of auditing firms to identify misspending and improve transparency at Gazprom and other monopolies in which the government still has big ownership stakes. "Auditors have been working on behalf of management rather than shareholders," says Andrei V. Sharonov, a deputy minister at Russia's Ministry of Economics.

The Kremlin wasn't always so concerned about policing its shareholdings--let alone the rest of Russia Inc. Over the past decade it let Gazprom Chief Executive Rem Vyakhirev run the company as his fiefdom. That changed last year when Putin ousted Vyakhirev and replaced him with an aide, Alexei Miller, with a mandate to clean up Gazprom.

Right now it's PwC that's in the hot seat. The focus is the review the auditor did for the Gazprom board last year on ties between Gazprom and Itera, a Moscow-based gas producer. Suspecting that Gazprom management was using Itera as a front company for the improper transfer of assets, a shareholder faction led by Browder sought to engage Big Five auditor Deloitte & Touche to investigate Gazprom-Itera transactions. Gazprom management was dead set against bringing in Deloitte & Touche, says Fyodorov. According to PwC sources, even some senior partners in the firm's Moscow office argued that any self-review would lack credibility. But PwC ultimately decided to have a probe done by an in-house team headed by a London partner. PwC delivered the report to Gazprom's board last July. Copies of the report are now providing fresh ammunition to PwC's critics who want to fire the firm from the Gazprom account.

There seems to be plenty of gunpowder. Consider this convoluted example from the report. PwC's review team examined a deal in which the province of Yamal-Nenetsk accepted gas from Gazprom as payment in kind for $200 million in taxes. The regional authorities sold the gas for a very low price to Itera, which then resold the energy to customers outside Russia at what PwC in its report called a "significant profit."

Something doesn't sound right here. Why couldn't Gazprom itself have sold the gas to foreign customers for a rich price, paid off its regional tax bill, and pocketed the profit for its shareholders? The report concludes that in-kind payment of gas saved Gazprom from borrowing cash at high interest rates to pay taxes. But according to a Hermitage analysis based on data from Russia's Audit Chamber, a government watchdog, the company lost out on a $5.5 billion pretax profit by handing over the gas to Itera via the Yamal-Nenetsk tax transaction.

Then there's the PwC review team's analysis of asset transfers from Gazprom to Itera. PwC found that Gazprom sold Itera a 32% stake in a gas-producing subsidiary, Purgas, for just $1,200. PwC noted the market price could have netted Gazprom $400 million and determined the deal was "advantageous for Itera." Why was this defensible? PwC's answer: Gazprom, afflicted by cash shortages due to Russia's financial crisis, lacked funds to develop the Purgas field.

That's weird, since Gazprom at the same time had the financial means to help Itera with $616 million in loans, credit guarantees, and various services. Itera went on to become the fourth-largest gas company in the world. "I don't know how auditors could condone this," Christopher Weafer, head of research at Moscow brokerage Troika Dialog, says of the asset transfers. Faced with stonewalling from Itera, the PwC review team could not determine whether Gazprom managers were beneficiaries of Itera. The firm, however, defends its record. "Nobody has ever demonstrated anything" that proves management siphoned off assets to Itera and pulled off other dubious deals, says Keith R. Rowden, the PwC partner who has supervised the Gazprom account since arriving in Moscow last March.

Former Gazprom managers, meanwhile, deny owning any stake in Itera. Itera says it cooperated with PwC's review, but adds it does not have to tell PwC who gets dividends because PwC is not its auditor.

Another controversy centers on Stroitransgaz, a Moscow pipeline-construction company that landed more than $1 billion in contracts from Gazprom. Stroitransgaz disclosed in a February, 1999, filing with Russia's Federal Securities Commission that Gazprom managers and relatives, including Vyakhirev's daughter, owned more than 50% of the contractor. That ownership tie, along with a report that Gazprom managers had transferred a block of Gazprom stock to Stroitransgaz at a nominal price, was featured in a 1999 article by the Russian daily Moskovsky Komsomolets.

Gazprom investors and analysts started to do their own digging. But the 1999 Gazprom annual report, approved by PwC, did not mention any link to Stroitransgaz. "That you could attribute to a lack of required diligence on the part of the auditor," says Steven Dashevsky, an energy analyst at Capital Group Aton in Moscow. Gazprom execs have denied any wrongdoing. But under pressure from Fyodorov, Gazprom disclosed Stroitransgaz as a related party in its 2000 report. As for Vyakhirev, an aide says he is "retired" and "will not answer any questions."

PwC is helping another large client, Russian oil major Yukos, move toward greater financial transparency. But with respect to Gazprom, many are not inclined to give PwC the benefit of the doubt. The belief that Gazprom remains largely opaque is a big reason why the stock remains depressed. "New management will never know what happened if they don't use a new auditor," says Mattias Westman, director of Prosperity Capital Management, a Moscow fund. Shareholders would push any new auditor to reopen Gazprom's books and build a case for full restitution of the company's stripped assets. PwC's biggest job in Russia could yet prove its most painful. As financial scandals go, this one has everything. A Big Five accounting firm accused of overlooking wildly improper deals in its probes of a client's books. A client that's one of the country's biggest energy firms, and yet is now a symbol for the evils of crony capitalism. The amounts involved? Billions and billions. There's more: leaked documents, infuriated shareholders, threatened lawsuits. Even the President of the country is angry.

Only one thing. We're not talking about Enron Corp. (ENE) No, the company at the center of this nasty tale is Gazprom (OGZPF), the biggest company in Russia, with sales of $20 billion in 2001, and one of the largest energy producers on the planet, with reserves six times the size of Exxon Mobil Corp.'s (XOM). The auditor in question is PricewaterhouseCoopers, the world's largest accounting firm. PwC has been signing off on Gazprom's books since 1996, and fed-up shareholders say it is high time to give the job to someone else. Together, Gazprom and PwC are at the center of a tempest whose resolution could determine whether corporate governance can ever take root in Russia.

Unlike Enron, Gazprom is not going bankrupt. But as with most stories involving Russia Inc., its tale is complex. In a nutshell, outsider shareholders accuse PwC of conducting dangerously lax audits of Gazprom, sheltering management from scrutiny over many questionable dealings, and depriving investors of vital information. Longstanding perceptions that investors were not being told the truth about the company's financial position have kept the stock price severely depressed. Depressed is right: Although its assets dwarf those of ExxonMobil's and despite a recent runup in the stock, Gazprom's market capitalization is only a twentieth of the U.S. energy giant's. "PwC missed egregious transactions that were obvious to everybody else and hurt shareholders," says Moscow fund manager William F. Browder, a 37-year-old former Salomon Brothers investment banker whose Russian investment fund, Hermitage Capital Management, has been buying Gazprom shares since 1996.

The problem is that Gazprom, renowned for its secrecy, is difficult to audit. But despite the apparent obstacles that PwC faced in getting information from management, the firm continued to sign off on the books anyway, says Gazprom independent director Boris Fyodorov, a former Russian Finance Minister who now runs investment banking firm United Financial Group. Why? To keep the account, he says. "If an auditor knows it cannot do a proper review, then it is just doing it for the money," says Fyodorov.

Gazprom won't comment. PwC says professional rules and its own policies prohibit it from discussing clients or commenting on its work for clients. One Moscow partner, however, says the firm is being faulted by critics who lack its grasp of Gazprom's inner workings.

Nonetheless, Gazprom shareholders will vote in June whether to retain PwC as auditor. Everything is coming to a boil right now because of a confidential document floating around Moscow, a copy of which was obtained by BusinessWeek. It's a review of PwC's auditing of Gazprom that PwC itself conducted last year--and which essentially finds nothing wrong with the Moscow office's work. PwC won't comment on the report. But Browder and others who have seen the document are up in arms over its findings.

Browder belongs to a community of Western investors who bought early into Russian stocks, betting that managers would make these companies more transparent and efficient. Now he wants to accelerate that process. A minority shareholder in Gazprom, he's running for a board seat on a platform of firing PwC. Browder is also exploring with Wall Street law firms the possibility of launching a class-action lawsuit against PwC in the U.S. on behalf of investors in Gazprom American depositary receipts. The hook would be that such investors purchased Gazprom ADRs on the basis of flawed audit opinions.

He may yet find a key ally in his fight to oust PwC. The Russian government owns a 38% stake in the company, which was enough to help it win control of the board last year. And none other than President Vladimir V. Putin is skeptical about the accuracy of the company's reports. "We know that enormous amounts of money were misspent," Putin told reporters last June.

The government has not tipped its hand about the vote on PwC. But Putin and his ministers are increasingly unhappy with the failure of auditing firms to identify misspending and improve transparency at Gazprom and other monopolies in which the government still has big ownership stakes. "Auditors have been working on behalf of management rather than shareholders," says Andrei V. Sharonov, a deputy minister at Russia's Ministry of Economics.

The Kremlin wasn't always so concerned about policing its shareholdings--let alone the rest of Russia Inc. Over the past decade it let Gazprom Chief Executive Rem Vyakhirev run the company as his fiefdom. That changed last year when Putin ousted Vyakhirev and replaced him with an aide, Alexei Miller, with a mandate to clean up Gazprom.

Right now it's PwC that's in the hot seat. The focus is the review the auditor did for the Gazprom board last year on ties between Gazprom and Itera, a Moscow-based gas producer. Suspecting that Gazprom management was using Itera as a front company for the improper transfer of assets, a shareholder faction led by Browder sought to engage Big Five auditor Deloitte & Touche to investigate Gazprom-Itera transactions. Gazprom management was dead set against bringing in Deloitte & Touche, says Fyodorov. According to PwC sources, even some senior partners in the firm's Moscow office argued that any self-review would lack credibility. But PwC ultimately decided to have a probe done by an in-house team headed by a London partner. PwC delivered the report to Gazprom's board last July. Copies of the report are now providing fresh ammunition to PwC's critics who want to fire the firm from the Gazprom account.

There seems to be plenty of gunpowder. Consider this convoluted example from the report. PwC's review team examined a deal in which the province of Yamal-Nenetsk accepted gas from Gazprom as payment in kind for $200 million in taxes. The regional authorities sold the gas for a very low price to Itera, which then resold the energy to customers outside Russia at what PwC in its report called a "significant profit."

Something doesn't sound right here. Why couldn't Gazprom itself have sold the gas to foreign customers for a rich price, paid off its regional tax bill, and pocketed the profit for its shareholders? The report concludes that in-kind payment of gas saved Gazprom from borrowing cash at high interest rates to pay taxes. But according to a Hermitage analysis based on data from Russia's Audit Chamber, a government watchdog, the company lost out on a $5.5 billion pretax profit by handing over the gas to Itera via the Yamal-Nenetsk tax transaction.

Then there's the PwC review team's analysis of asset transfers from Gazprom to Itera. PwC found that Gazprom sold Itera a 32% stake in a gas-producing subsidiary, Purgas, for just $1,200. PwC noted the market price could have netted Gazprom $400 million and determined the deal was "advantageous for Itera." Why was this defensible? PwC's answer: Gazprom, afflicted by cash shortages due to Russia's financial crisis, lacked funds to develop the Purgas field.

That's weird, since Gazprom at the same time had the financial means to help Itera with $616 million in loans, credit guarantees, and various services. Itera went on to become the fourth-largest gas company in the world. "I don't know how auditors could condone this," Christopher Weafer, head of research at Moscow brokerage Troika Dialog, says of the asset transfers. Faced with stonewalling from Itera, the PwC review team could not determine whether Gazprom managers were beneficiaries of Itera. The firm, however, defends its record. "Nobody has ever demonstrated anything" that proves management siphoned off assets to Itera and pulled off other dubious deals, says Keith R. Rowden, the PwC partner who has supervised the Gazprom account since arriving in Moscow last March.

Former Gazprom managers, meanwhile, deny owning any stake in Itera. Itera says it cooperated with PwC's review, but adds it does not have to tell PwC who gets dividends because PwC is not its auditor.

Another controversy centers on Stroitransgaz, a Moscow pipeline-construction company that landed more than $1 billion in contracts from Gazprom. Stroitransgaz disclosed in a February, 1999, filing with Russia's Federal Securities Commission that Gazprom managers and relatives, including Vyakhirev's daughter, owned more than 50% of the contractor. That ownership tie, along with a report that Gazprom managers had transferred a block of Gazprom stock to Stroitransgaz at a nominal price, was featured in a 1999 article by the Russian daily Moskovsky Komsomolets.

Gazprom investors and analysts started to do their own digging. But the 1999 Gazprom annual report, approved by PwC, did not mention any link to Stroitransgaz. "That you could attribute to a lack of required diligence on the part of the auditor," says Steven Dashevsky, an energy analyst at Capital Group Aton in Moscow. Gazprom execs have denied any wrongdoing. But under pressure from Fyodorov, Gazprom disclosed Stroitransgaz as a related party in its 2000 report. As for Vyakhirev, an aide says he is "retired" and "will not answer any questions."

PwC is helping another large client, Russian oil major Yukos, move toward greater financial transparency. But with respect to Gazprom, many are not inclined to give PwC the benefit of the doubt. The belief that Gazprom remains largely opaque is a big reason why the stock remains depressed. "New management will never know what happened if they don't use a new auditor," says Mattias Westman, director of Prosperity Capital Management, a Moscow fund. Shareholders would push any new auditor to reopen Gazprom's books and build a case for full restitution of the company's stripped assets. PwC's biggest job in Russia could yet prove its most painful. By Paul Starobin and Catherine Belton in Moscow

By Paul Starobin and Catherine Belton in Moscow

By Paul Starobin and Catherine Belton in Moscow


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