PwC ordered to pay $625M in damages over bank's audit
PricewaterhouseCoopers LLP was ordered to pay the Federal Deposit Insurance Corp. more than $625 million for negligence in the audit of Colonial BancGroup Inc., an Alabama bank holding company that failed during the financial crisis.
U.S. District Judge Barbara Jacobs Rothstein issued the ruling Monday granting the FDIC’s damages request after she found in December that Pricewaterhouse had failed in its audits of the bank from 2003 to 2005 and for 2008. The firm didn’t design its audits to detect fraud or gather enough evidence of its funding to sign reports for those years, she said.
“PwC US is disappointed by today’s ruling and we don’t believe the FDIC is entitled to the recovery of any damages in this case in light of the Court’s prior findings that numerous employees at Colonial actively and substantially interfered with our audits," said Phil Beck, an attorney for the firm. "We intend to pursue an appeal."
Colonial BancGroup was the parent company of Colonial Bank, which collapsed in 2009 amid a fraud perpetrated by its largest customer, Taylor Bean & Whitaker Mortgage Corp. Former Taylor Bean chairman Lee Farkas and five other Taylor Bean executives were convicted for their roles.
From 2002 through August 2009, Farkas sold more than $1.5 billion in mortgage loans that to Colonial Bank that Taylor Bean had already committed or sold to other investors.
Colonial Bank was the sixth-largest bank failure in U.S. history, and its collapse cost the FDIC’s insurance fund about $4.2 billion. PricewaterhouseCoopers settled similar allegations by the trustee for Taylor Bean in the middle of a trial in Miami, in August 2016.