PwC to Pay $625 Million in Damages After Audit
U.S. District Judge Barbara Jacobs Rothstein ordered PricewaterhouseCoopers LLP to pay the Federal Deposit Insurance Corp. more than $625 million for negligence in an audit of Colonial BancGroup, Inc., a bank holding company in Alabama that went under during the most recent economic downturn.
The FDIC requested the damages, leading to the case overseen by Judge Rothstein. Rothstein ruled PwC failed in bank audits of Colonial BancGroup between 2003 to 2005 and in 2008. The firm’s audits used in those years were not properly designed to detect fraud or gather evidence of funding to sign reports in those years.
Activities likely led to bank failure
The Colonial BancGroup was the parent company of the now-defunct Colonial Bank, which went out of business in 2009 after its largest customer, Taylor Bean & Whitaker Mortgage Corp, committed fraud against the bank. The former chairman of Taylor Bean, Lee Farkas, and five other executives from the company were convicted on felony fraud charges for their roles in the fraudulent scheme.
Between 2002 and 2009, Farkas sold off more than $1.5 billion in mortgage loans to Colonial Bank, which Taylor Bean had already sold or committed to other investors. The result was the sixth-largest bank failure in American history. The collapse of Colonial Bank cost FDIC about $4.2 billion from its insurance fund.
PwC also settled similar allegations to this case in a case filed by the trustee of Taylor Bean during a trial in August 2016.
To learn more about the importance of transparency and reporting in cases involving fraud, contact an experienced Dallas attorney at Kardell Law Group.