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A US court ruled that the PwC audit firm failed in its homework when reviewing the Colonial Bank books in the early 2000s and that it had not so not detected a case of massive mortgage fraud.
PwC announced that it would appeal the verdict. (Photo: Vincent Kessler / Reuters)
The PwC audit firm was convicted earlier this week in the US as part of a mortgage fraud case in the early 2000s for $ 625 million dollars in damages. An Alabama court had come to the conclusion that the auditors should have discovered a scam jointly committed by the managers of mortgage lender Taylor, Bean & Whitaker (TBW) and Colonial Financial Institution. PwC had been an accountant for Colonial BancGroup, Colonial's parent company.
The court justifies the decision by stating that PwC did not follow a standard procedure that could have detected fraud during the examination of the books. In addition, PwC did not consider mortgage documents that could have made the fraud visible. TBW had liquidity problems in the early 2000s and had used more and more overdrafts at Colonial. To cover them, TBW sold another mortgage sold to Colonial a second time. The fraud had led to the bankruptcy of Colonial BancGroup in 2009, at the height of the financial crisis, during which the FDIC had to replace the deposits of savers and other bank customers from one bank to another. estimated value at $ 2.8 billion. The FDIC filed a lawsuit against PwC in 2012. PwC announced that it would appeal the verdict
The amount of compensation is the highest ever imposed on such an accounting firm and exceeds $ 456 million raised by KPMG and the US Department of Justice in 2005 as part of tax schemes
The TBW colonial fraud had already dragged PwC and its competitors to court. PwC had an agreement with TBW's Trustee Bank last year. In addition, Deloitte & Touche, a TBW accountant, was able to settle a lawsuit filed by the Department of Justice under an agreement and payment of $ 149.5 million.
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