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Discussion Questions: 1. How did PwC get into this situation in the first place? What issues should a company consider before doing business in an

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Discussion Questions:

1. How did PwC get into this situation in the first place? What issues should a company consider before doing business in an economically developing country? What are the risks? Did this ethical dilemma begin long before the Russian governments demands of PwC?

2. When countries open up to capitalism and economic freedom, there is much creamthat is, businesses can move in easily and capture markets with little effort. However, what are the issues that accompany this ease of initial introduction?

3. What two PwC values would be in conflict if the Russian government demands disclosure by PwC?

Case 6.4 The Former Soviet Union: A Study of Three Companies and Values in Conflict PwC and the Russian Tax Authorities 1 3 PriceWaterhouseCoopers (or PwC, as it is known), one of the United States' "Big 4" accounting firms, has had a tax practice in Russia since the time that country changed from Communist rule. One of PwC's clients in Russia was Yukos, a major Russian oil company that is now bankrupt. Russia's Federal Tax Service, an agency similar to the United States' IRS, has filed suit against PwC, alleging that it concealed tax evasion by Yukos for the years 2002 to 2004. The Tax Service also announced a criminal probe of PwC's conduct with regard to its tax services for Yukos. Twenty Tax Service agents searched PwC's offices in Moscow and questioned PwC employees about the Yukos account. Yukos lost its tax case and has paid $9.2 million in charges for the nonpayment of taxes. However, Yukos and PwC do e the case on appeal. Many see the battle between PwC and the Tax Service as part of the Russian govern- ment's ongoing battle to sell off the assets of Yukos and avoid the surrender of the com pany's assets to investors and creditors who have filed claims. Those suits are pending in courts in The Hague. Some analysts believe that the Russian government is hoping to press PwC into revealing information that would help it take back the Yukos assets. If PwC is found to have engaged in evasion, it loses its license to do business in Russia, but if it turns over information, it is likely to lose its clients in Russia

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