PwC has to pay $625.3 million in damages to the FDIC after fraud led to one of the largest bank failures of the global financial crisis.
A federal judge has ordered PricewaterhouseCoopers to pay $625.3 million in damages to the Federal Deposit Insurance Corp (FDIC) for failing to uncover fraud that led to one of the largest bank failures of the global financial crisis. US District Judge Barbara Rothstein found that PwC’s negligence was the likely cause of FDIC damages from the August 2009 demise of Montgomery, Alabama’s Colonial BancGroup Inc, once one of the 25 largest US banks. Judge Rothstein said PwC failed to uncover a multi-year fraud between Colonial, its former client, and Ocala, Florida-based Taylor, Bean & Whitaker, once America’s 12th largest mortgage lender and a major Colonial customer. The FDIC sued in its role as receiver for Colonial Bank, which once had more than $25 billion of assets and 340 branches. By the time the fraud was discovered, Colonial’s balance sheet included $1.47 billion of mortgage trades that were ‘fake or otherwise impaired,’ Judge Rothstein wrote.
The $625.3 million award covers PwC’s audits of Colonial from 2003 to 2005 and in 2008. Judge Rothstein had found PwC liable for negligence in December, after a non-jury trial, and tried the damages issue in March, also without a jury. PwC argued that the FDIC could recover $306.7 million at most, and that no damages were justified because numerous Colonial employees had interfered with its audits. External counsel Phil Beck said in a statement provided by PwC, ‘we intend to pursue an appeal of this matter at the earliest opportunity.’ The FDIC said it does not discuss pending litigation.