By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
By New Times
Price Waterhouse says the verdict in the United Bank case is patently unfair and raises questions about just how far those who lost money will go to find a scapegoat. The firm promises vigorous appeals, and it likely will be years before the final outcome of the suit is decided.
"This case was nothing more than a finger-pointing exercise and an attempt to shift responsibility for their own bad business decisions to someone who played no role in the transaction," says Erica Baird, special assistant to the Price Waterhouse board chairman in New York City. "This is outrageous. This is ridiculous. This is going to be reversed on appeal."
Attorneys for Standard Chartered, however, contend that the accountants have been rightly brought to task for failing to diagnose an ailing bank. "We believe and the jury believed that the loss would have been avoided by Standard Chartered if Price Waterhouse had done their job," says Mark Dangerfield, an attorney with Beus, Gilbert & Morrill.
To press its case, Standard Chartered had to argue it had placed almost blind trust in Price Waterhouse's audits of United. And ultimately that meant forwarding an argument that--although the jury accepted it--strikes some observers as incredulous.
The argument was that a primary cause of the multimillion-dollar business fiasco--a deal scrutinized for more than a year and blessed by legions of supposedly savvy bankers and attorneys in Arizona, California and England--was a junior accountant with Price Waterhouse named Laurie Pollitt who was sent in to examine United Bank's loans when she was 25 years old.
the last thing Laurie Pollitt says she expected, or wanted, in her life was to be dragged into the limelight. She did choose, after all, to become an accountant, a profession that does not inspire many television dramas and whose members generally retire with few newspaper mentions in their scrapbooks.
Pollitt, now 31, grew up in Louisville, Kentucky, as her accent attests. Her mother was an executive secretary, her father in construction, and Pollitt decided to become an accountant, she says, "because I wanted to be in business, wanted to have a career and I was very good in math."
At Eastern Kentucky University, she met her husband, Jeff. After graduating in 1982, she worked two years as an accountant at a data-processing firm in Cincinnati, Ohio, before job prospects brought the couple to the Valley in late 1984.
Pollitt, in her mid-20s, got on with the Phoenix office of Price Waterhouse in January 1985. That year she was introduced to the audit that would ultimately teach her that blame tends to roll downhill.
Price Waterhouse had audited United Bank for years, and the process changed little each time around. A team of fieldworkers, usually around four, according to later trial testimony, would go into the bank in the fall, set up a temporary office and spend several weeks poring over loan files, computer print-outs and other paperwork.
They were looking for warning signs--indications of fraud, slippery accounting, inadequate records and such--that might give reason to believe the bank was misrepresenting its condition in its financial statements.
In late December, more fieldwork was done, and then the team's paperwork and findings were passed up the Price Waterhouse chain of command. Karl Almquist, the partner primarily responsible for the United Bank audit, would ultimately review the work of his team and pass judgment on the bank's financial statements.
In the greater context of United Bank and multimillion-dollar bank mergers, Laurie Pollitt was a very small player.
As a relatively junior staff accountant still awaiting state certification, she made just more than $20,000 a year, according to trial testimony. Pollitt was assigned to the audit teams that went into selected United Bank branches during the two years before the bank was sold. Her first year, 1985, she looked primarily at credit-card accounts.
But in 1986, her role expanded greatly, and Pollitt found herself reviewing the files of complex commercial loans involving millions of dollars. Some of the loan portfolios she checked were the ones that "blew up" the next year, causing United's financial losses.
Pollitt says she did her job by the book and makes no apologies for her fieldwork. "It was a very good audit," she says, and she was a small part of it. At trial she would testify that there was no way she could have foreseen the impending troubles of some of the loans she reviewed.
In addition to her college degree, Pollitt says, she had several years of experience under her belt and received five weeks of training from Price Waterhouse in bank auditing.
Karl Almquist, the Price Waterhouse partner responsible for the United audit, says Pollitt was a perfectly capable member of the team.
But in court, Standard Chartered's attorneys needed to make Pollitt look like an idiot. Although she was not a defendant in the case, proving her incompetent was crucial to the argument that Price Waterhouse had bungled the United audits.
For 11 days, Pollitt was put on the stand and Leo Beus, the lead attorney for Standard Chartered, pounded away at her, trying to show that she had not done a thorough job. In painstaking and time-consuming detail, Beus attempted to reconstruct Pollitt's work during 1986 to show that, if she had known what she was doing, she would have uncovered the bad loans United Bank was carrying.