Mugshot Lee Farkas

Lawsuit Against Bank Auditor PWC Goes to Court for $5.5 Billion Over Colonial Bank, Taylor, Bean & Whitaker Fraud

Colonial Bank in Miami Beach, on August 17, 2009, days after it failed. The bank’s fraud with Taylor, Bean & Whitaker is the subject of a lawsuit against its auditor, PricewaterhouseCooper, which failed to catch the fraud for seven years.

The largest-ever lawsuit against an auditing firm is set to open Monday in a Miami-Dade County Circuit Court, pitting Big Four firm PwC against a trustee of the defunct Taylor, Bean & Whitaker Mortgage Corporation.

At stake: $5.5 billion.

The lawsuit was filed in 2013 by a trust formed following the bankruptcy of Ocala-based Taylor, Bean & Whitaker, which in the early 2000s was one of the nation’s largest mortgage companies. The firm was raided by federal agents in 2009 for its part in a seven-year, multibillion-dollar fraud scheme with Colonial BancGroup.

According to the lawsuit, the fraud went undetected by PwC, the independent public auditor in charge of auditing Colonial, as a result of “gross negligence.”

PwC maintains that it, too, was duped.

The $5.5 billion action is one of a wave of suits against major auditing firms, including PwC, in the aftermath of the 2009 banking crisis. Most have alleged faulty work, said Jonathan Perlman, equity partner at Miami-based firm Genovese Joblove & Battista, who has prosecuted several cases against auditing firms. A majority of the cases have settled, including a suit brought against PwC for the alleged negligent auditing of failed brokerage MF Global Holdings Ltd. PwC paid $65 million in a settlement.

More here…

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