Earlier this month, PricewaterhouseCoopers (PwC) LLP was fined to pay the Federal Deposit Insurance Corp (FDIC) over $625 million for negligence in Colonial BancGroup Inc’s audit, a bank holding company that failed during the financial crisis based in Alabama.
U.S. District Judge Barbara Jacobs Rothstein granted FDIC’s damages request after finding that PwC had failed in its audit of the bank from 2003 to 2005 and for 2008. PwC failed by not designing its audit to identify fraud “or gather enough evidence of its funding to sign reports for those years.”
Phil Beck, an attorney for the firm 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. We intend to pursue an appeal.”
Colonial BancGroup’s Collapse
Colonial Bank, whose parent company was Colonial BancGroup, collapsed in 2009 in the middle of fraud executed by its biggest client Taylor Bean & Whitaker Mortgage Corp. Ex-chairman of Taylor Bean Lee Farkas and other five executives were convicted for their role in the fraud.
From 2002 to August 2009, Farkas sold over $1.5 billion in mortgage loans to Colonial Bank that Taylor Bean had already sold to other investors.
Colonial Bank’s collapse cost FDIC’s insurance fund about $4.2 billion and it was the sixth-largest bank failure in US history.