PwC settles with FDIC for $335M over Colonial Bank audits
PricewaterhouseCoopers has settled with the Federal Deposit Insurance Corporation for $335 million over its audits of Colonial Bank, which failed in the midst of the financial crisis.
The FDIC announced the settlement Monday as the official receiver for the failed bank. The suit related to professional negligence claims brought by the FDIC against PwC arising out of the firm’s audits of Colonial.
The bank, based in Montgomery, Alabama, failed in August 2009, with $25.5 billion in assets and a loss to the FDIC’s Deposit Insurance Fund estimated at $2.958 billion as of Dec. 31, 2017. A federal district court in Alabama held PwC liable for professional negligence in late December 2017 (see PwC ruled negligent in Colonial Bank auditing case). In July 2018, the district court awarded damages of $625 million to the FDIC on its claims. U.S. District Judge Barbara Jacobs Rothstein said the firm hadn't designed its audits to detect fraud or gather enough evidence, according to Bloomberg News. Earlier that year, in April, the FDIC settled professional negligence claims against Crowe Horwath LLP arising out of its internal audits of Colonial Bank for $60 million.
PwC confirmed the settlement. "PricewaterhouseCoopers LLP and the Federal Deposit Insurance Corporation as Receiver for Colonial Bank have settled professional negligence claims brought by the FDIC-R against PwC to their mutual satisfaction," the firm said in a statement forwarded by spokesperson Beth Parker.
The FDIC sued the firm for failing to detect a multi-billion-dollar fraud against Colonial Bank and its parent Colonial BancGroup by Taylor, Bean & Whitaker Mortgage Corp., another financial firm that collapsed in 2009. The FDIC faulted PwC for letting Colonial account for certain transactions as sales of mortgages from Taylor Bean to Colonial, rather than as loans from Colonial to Taylor Bean that were secured by mortgages. In 2016, PwC reached a confidential settlement with Taylor Bean’s bankruptcy trustee for an undisclosed sum (see PwC reaches settlement in Taylor Bean lawsuit).