Hard-pressed

New Delhi, Jan. 18: Deloitte Haskins & Sells and KPMG, the auditors nominated by the new Satyam board to restate the accounts, have been at the receiving end of fraud allegations in the US.

Last year, an independent finding of the US department of justice shows KPMG having either initiated an accounting fraud at New Century Financial Corp or sat idly while the failed sub-prime mortgage lender committed fraud in 2005 and 2006.

Once the second-largest US sub-prime lender, New Century filed for bankruptcy protection in April, 2008.

The justice department report said New Century “engaged in a number of significant improper and imprudent practices related to its loan originations, operations, and financial reporting.”

KPMG contributed to some of these accounting and financial errors “by enabling them to persist and, in some instances, precipitating the company’s departures from applicable accounting standards.”

KPMG had disputed the report.

According to Parijat Sinha, a Supreme Court counsel, “In India, the law of torts is not developed enough for judges to give the kind of huge claims that are allowed against accounting firms in the US, but claims can be filed against firms such as Price Waterhouse for certifying false accounts which formed the basis for investment decisions by thousands here.”

Last year, Deloitte along with General Motors agreed to pay $303 million to settle claims of the auto maker misleading its shareholders. The two-year class-action suit claimed that Deloitte & Touche had falsely certified that GM’s financials followed GAAP, the US system of accounting. This was the second-largest shareholder settlement last year, after Xerox and KPMG agreed to pay $670 million in another case.

Early last year, Deloitte also agreed to pay $38 million to settle charges of impropriety and negligence in an accounting scandal, which broke out in 2005 at US auto parts firm Delphi .