Cyclopedia of Economics.pdf

Cyclopedia

Of Economics

2nd EDITION

Sam Vaknin, Ph.D.

Editing and Design:

Lidija Rangelovska

A Narcissus Publications Imprint, Skopje 2007

Not for Sale! Non-commercial edition.

any manner without written permission from:

Lidija Rangelovska – write to:

palma@unet.com.mk or to

samvaknin@gmail.com

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Created by:

LIDIJA RANGELOVSKA

REPUBLIC OF MACEDONIA

C O N T E N T S

I. A

II. B

III. C

IV. D

V. E

VI. F

VII. G

VIII. H

IX. I-J

X. K

XI. L

XII. M

XIII. N

XIV. O

XV. P-Q

XVI. R

XVII. S

XVIII. T

XIX.

U-V-W

XX.

X-Y-Z

XXI.

The Author

Accounting (in Eastern Europe)

Hermitage Capital Management, an international

investment firm owned by HSBC London, is suing PwC

(PricewaterhouseCoopers), the biggest among the big four

accounting firms (Andersen, the fifth, is being

cannibalized by its competitors).

Hermitage also demands to have PwC's license suspended

in Russia. All this fuss over allegedly shoddy audits of

Gazprom, the Russian energy behemoth with over $20

billion in annual sales and the world's largest reserves of

natural gas. Hermitage runs a $600 million Russia fund

which is invested in the shares of the allegedly misaudited

giant.

The accusations are serious. According to infuriated

Hermitage, PwC falsified and distorted the 2000-1 audits

by misrepresenting the sale of Gazprom's subsidiary,

Purgaz, to Itera, a conveniently obscure entity. Other loss

spinning transactions were also creatively tackled.

Stoitransgaz - partly owned by former Gazprom managers

and their relatives - landed more than $1 billion in

lucrative Gazprom contracts.

These shenanigans resulted in billions of dollars of losses

and a depressed share price. AFP quotes William

Browder, Hermitage's disgruntled CEO, as saying: "This

is Russia's Enron". PwC threatened to counter-sue

Hermitage over its "completely unfounded" allegations.

But Browder's charges are supported by Boris Fyodorov,

a former Russian minister of finance and a current

Gazprom independent director. Fyodorov manages his

own investment boutique, United Financial Group.

Browder is a former Solomon Brothers investment

banker. Other investment banks and brokerage firms -

foreign and Russian - are supportive of his allegations.

They won't and can't be fobbed.

Fyodorov speculates that PwC turned a blind eye to many

of Gazprom's shadier deals in order to keep the account.

Gazprom shareholders will decide in June whether to

retain it as an auditor or not. Browder is initiating a class

action lawsuit in New York of Gazprom ADR holders

against PwC.

Even Russia's president concurs. A year ago, he muttered

ominously about "enormous amounts of misspent money

(in Gazprom)". He replaced Rem Vyakhirev, the oligarch

that ran Gazprom, with his own protégé. Russia owns 38

percent of the company.

Gazprom is just the latest in an inordinately long stream

of companies with dubious methods. Avto VAZ bled itself

white - under PwC's nose - shipping cars to dealers,

without guarantees or advance payments. The penumbral

dealers then vanished without a trace. Avto VAZ wrote

off more than $1 billion in "uncollected bills" by late

1995. PwC did make a mild comment in the 1997 audit.

But the first real warning appeared only three years later

in the audit for the year 2000.

Andrei Sharonov, deputy minister in the federal Ministry

of Economics said, in an interview he granted "Business

Week" last February: "Auditors have been working on

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