New York (Sept. 18, 2003) -- Are the nation's largest accounting firms padding their expense accounts and bilking clients out of millions?

That's the charge being levied against three of the Big Four accounting firms, all of which are accused in a lawsuit of overbilling clients by hundreds of millions of dollars for travel-related expenses, the Wall Street Journal reported Wednesday.

The Justice Department's investigation into the allegations are contained in a previously unpublicized lawsuit filed in October 2001.

The suit, pending in an Arkansas state circuit court, accuses PricewaterhouseCoopers, KPMG and Ernst & Young of padding the travel-related expenses for which they billed thousands of clients over a 10-year period dating back to 1991.

According to the suit, the firms knowingly billed clients for the full face value of airline tickets, hotels and car-rentals, while pocketing rebates and volume discounts that they got from various airline, car-rental and hotel companies.

At times, the rebates slashed the firms' out-of-pocket costs by up to 40 percent of the purchase price, the suit has alleged, citing internal firm documents filed with the court.

The suit, filed by closely held Warmack-Muskogee Limited Partnership, a shopping-mall operator, also accuses the accounting firms of colluding with each other to secure favorable deals with various travel vendors. It also alleges that the firms operated under an agreement not to disclose the existence of the rebates to clients or to credit clients fully for the rebates.

The defendants in the suit, all of which deny the lawsuit's allegations, have filed motions seeking to dismiss the case as groundless and to defeat requests that the lawsuit be certified as a class action.

-- WebCPA staff

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