{"id":5399,"date":"2012-11-20T00:00:00","date_gmt":"2012-11-20T06:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2012\/11\/fdic_sues_pricewaterhouse_coop"},"modified":"2022-03-09T16:31:51","modified_gmt":"2022-03-09T22:31:51","slug":"fdic-sues-pricewaterhouse-coop","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/fdic-sues-pricewaterhouse-coop\/","title":{"rendered":"FDIC Sues Pricewaterhouse Coopers & Crowe Horwath for Over $1B Over Alleged Failure to Detect Large Fraud That Led to Colonial Bank\u2019s Collapse"},"content":{"rendered":"

In a record first involving the Federal Deposit Insurance Company suing the auditors of a failed bank, the government agency has filed a lawsuit against Crowe Horwath LLP (CROHORP) and PricewaterhouseCoopers LLP for over $1 billion for their alleged failure to detect the securities fraud<\/a> perpetuated by Taylor Bean & Whitaker Mortgage Corp. that led to the demise of Colonial Bank. Taylor Bean was one of the bank\u2019s biggest clients. The two auditors are accused of gross negligence, professional malpractice, and breach of contract for not spotting the scam. <\/p>\n

According to the FDIC\u2019s complaint, two Colonial mortgage lending employees, Teresa Kelly and Catherine Kissick, let Taylor Bean officials divert money from the bank without it getting collateral in return. This resulted in Taylor Bean allegedly stealing nearly $1 billion from Colonial by promising it would provide the bank with mortgages that it had actually sold to other banks. The FDIC contends that not only did Kissick and Kelly know about Bean\u2019s fraud but also they made it possible for the cash to be illegally diverted. The two of them would later plead guilty to aiding Taylor Bean\u2019s fraud. <\/p>\n

In 2009, Alabama banking regulators seized Colonial. The downfall of Colonial Bank is considered one of the biggest bank failures in our nation\u2019s history and Is expected to cost the FDIC\u2019s insurance fund about $5 billion. <\/p>\n

Although auditing firms usually tend to benefit from pari delicto, a common-law doctrine that prevents one wrongdoer from suing another for money made from a joint wrongdoing (and since employees\u2019 actions are usually imputed to the corporation, in this case Colonial typically would also be considered a wrongdoer), the FDIC’s securities case <\/a>portrays the Colonial lending officials as rogue employees who were working against the bank\u2019s interest\u2014especially as Colonial was harmed by the fraud when it lent Taylor Bean hundreds of millions of dollars that had been secured by loans that didn\u2019t exist or were worthless. If the FDIC succeeds in demonstrating that Kissick and Kelly were working for their own benefit, then in pari delicto may not provide Pricewaterhouse Coopers and Crowe Horwath with such protections. <\/p>\n

Meantime, Pricewaterhouse Coopers\u2019s legal team is contending that Colonial\u2019s employees acted to protect Colonial from loss and that Taylor Bean had been paying the bank $20-30 million\/month in interest. The defendants are also arguing that auditors shouldn\u2019t have been expected to discover the fraud that was so well hidden that the FDIC and OCC didn\u2019t uncover it either when they conducted targeted exams. <\/p>\n

A Tale of Two Lawsuits — PricewaterhouseCoopers and Colonial Bank<\/a>, Forbes, November 10, 2012 <\/p>\n

FDIC Sues Auditors Over Colonial Bank Collapse<\/a>, Smart Money\/Dow Jones, November 15, 2012 <\/p>\n

Federal Deposit Insurance Corporation<\/a><\/p>\n


\nMore Blog Posts:<\/strong>
\nFDIC Objects to Bank of America\u2019s Proposed $8.5B Settlement Over Mortgage-Backed Securities<\/a>, Stockbroker Fraud Blog, August 30, 2011 <\/p>\n

Texas Securities RoundUp: Provident Royalties CEO Pleads Guilty in $485M Ponzi Scam and District Court Upholds $100K Arbitration Award in Adviser Fee Dispute<\/a>, Stockbroker Fraud Blog, November 10, 2012 <\/p>\n

Standard & Poor\u2019s Misled Investors By Giving Synthetic Derivatives Its Highest Ratings, Rules Australian Federal Court, Institutional Investor Securities Blog, November 8, 2012 <\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

In a record first involving the Federal Deposit Insurance Company suing the auditors of a failed bank, the government agency has filed a lawsuit against Crowe Horwath LLP (CROHORP) and PricewaterhouseCoopers LLP for over $1 billion for their alleged failure to detect the securities fraud perpetuated by Taylor Bean & Whitaker Mortgage Corp. that led […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3740,3741],"tags":[2592,2593],"class_list":["post-5399","post","type-post","status-publish","format-standard","hentry","category-miscellaneous","category-securities-fraud","tag-auditors","tag-fdic"],"yoast_head":"\nFDIC Sues Pricewaterhouse Coopers & Crowe Horwath for Over $1B Over Alleged Failure to Detect Large Fraud That Led to Colonial Bank\u2019s Collapse — Investor Lawyers Blog — November 20, 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