* PwC retained to review accounts after 2000 CFTC action
* PwC says was not Peregrine's auditor, says work limited (Adds details, comment from PwC)
By Sarah N. Lynch
WASHINGTON, July 25 (Reuters) - PricewaterhouseCoopers, one of the world's largest accounting firms, reviewed the accounts of failed futures brokerage Peregrine Financial Group while the alleged fraud at the brokerage was occurring, a top regulator told lawmakers on Wednesday.
Gary Gensler, chairman of the Commodity Futures Trading Commission, revealed that PwC was retained in 2000 after Peregrine settled an enforcement action from the CFTC.
The enforcement action, which arose from allegations that Peregrine had violated net capital rules, required the brokerage firm to retain a second independent public accounting firm to review certain financial accounts and report back to the CFTC.
Gensler, who was testifying before the House Agriculture Committee, would not detail what PwC found, but the involvement of a Big Four accounting firm drew scrutiny from some lawmakers.
"You mentioned PricewaterhouseCoopers. Certainly, they would have verified the account balances, would they have not?" asked Tim Huelskamp, a Republican from Kansas.
Caroline Nolan, a spokeswoman for PwC, told Reuters that "PwC has never been Peregrine's auditor."
She said PwC was "retained to do limited, agreed-upon procedures" as laid out in the CFTC's order, but would not elaborate on PwC's role with the firm, citing client confidentiality.
This is not the first time PwC has gotten unwelcome attention after the collapse of a futures broker.
PricewaterhouseCoopers also worked as the auditing firm for MF Global, which filed for bankruptcy last October and left investigators searching for an estimated $1.6 billion in customer funds.
The fraud at Peregrine came to light after the firm's founder and chief executive, Russell Wasendorf Sr., attempted suicide earlier this month and left a signed note describing how he bilked customers of more than $100 million over a nearly 20-year period, partly by forging bank statements.
Wasendorf's admission detailed how he used little more than a rented post office box, Photoshop software and inkjet printers to dupe regulators by intercepting bank confirmation requests in the mail and forging the documents to conceal missing money.
Reuters previously reported that the CFTC is looking into why Peregrine used Veraja-Snelling Co, a tiny audit firm located in a suburban Chicago home, to audit its books for at least 2010 and 2011.
Veraja-Snelling's proprietor, Jeannie Veraja-Snelling, could not be reached for comment.
Gensler, in his testimony on Wednesday, said the CFTC had flagged concerns about the "the abilities of the firm's auditor" in the 2000 enforcement action that prompted Peregrine to retain PwC.
The CFTC order lays out a list of things PwC was hired to do, including reviewing accounts payable and accounts receivable.
It also required the independent accounting firm to read over daily customer segregation reports as part of checking net capital computations, and to make sure wire transfers and deposit statements corresponded to bank statements.
The CFTC order says that the accounting firm would conduct the work for three quarters: those ending October 31, 2000, March 31, 2001 and June 30, 2001.
Separately, Peregrine's bankruptcy trustee told Reuters on Wednesday that he has hired PwC as forensic accountants to help figure out what remains at the failed futures brokerage. (Reporting By Sarah N. Lynch; Additional reporting by Dena Aubin in New York and Ann Saphir in Chicago; Editing by Gerald E. McCormick and Tim Dobbyn)