Colonial Bank was the largest bank failure of 2009. Colonial had a lot of competition in a year that claimed 140 banks. But Colonial had help, having purchased roughly $1 billion in fake mortgages from Taylor Bean and Whitaker Mortgage. Lee Farkas, the majority owner of TBW, is now serving a 30 year sentence for 14 counts of conspiracy and fraud.
But what about Colonial Bank’s auditors, which failed uncover one of the largest and longest-running bankfrauds in history — failing to notice that hundreds of millions of dollars of the bank’s assets were either missing, worthless, or had been sold to someone else? Apparently they may also get their day in court.
On October 31, the Federal Deposit Insurance Corporation, the regulatory agency that took Colonial Bank into receivership, filed a lawsuit against the bank’s former auditors, PricewaterhouseCoopers (PwC) and Crowe Horwath. The complaint charges both companies with professional negligence, gross negligence and negligent misrepresentation. PwC was also charged with breach of contract.
Sources and Coverage:
Complaint, FDIC v. PricewaterhouseCoopers LLP and Crowe Horwath LLP
Thompson Reuters News & Insight, by Allison Frankel, FDIC Files First Lawsuit Against Auditor of Failed Bank, Targets PwC
Bloomberg, by Tom Schoenberg, Ex-Taylor Bean Chairman Farkas Gets 30 Years for $3 Billion Mortgage Fraud
CNBC, by Jenna Martino, American Greed: Cracking the Facade of Fraud