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PricewaterhouseCoopers Agrees to $335M Settlement Over Colonial Bank Audits

gavelThe Federal Deposit Insurance Corporation (FDIC), acting as a receiver for Colonial Bank, announced that PricewaterhouseCoopers (PwC) will pay a $335 million settlement stemming from claims of professional negligence relating to audits of Colonial Bank, which collapsed during the housing crisis in 2009. At the time, Colonial also funded mortgages from Taylor, Bean & Whitaker (TBW). Both TBW and Colonial failed in the aftermath of the revelation that TBW was altering their books in order to conceal millions of dollars' worth of mortgages that did not exist.

According to the FDIC statement, PwC was previously held liable for professional negligence during its audit of Colonial Bank. That initial ruling came down on December 28, 2017, from the United States District Court for the Middle District of Alabama. Colonial Bank has $25.5 billion in assets, and, after FDIC took over Colonial in the wake of its collapse, it asserted that Colonial's failure had cost the FDIC some $5 billion.

The FDIC statement notes that the bank's collapse eventually cost the Deposit Insurance fund an estimated "$2.958 billion as of December 31, 2017."

In 2018, District Judge Barbara Jacobs Rothstein awarded FDIC damages based on these claims, ordering PwC to pay more than $625 million as a result of their Colonial audits. The final settlement of $335 million is up from the $306.75 million total that PwC initially estimated it should pay the FDIC relating the Colonial audits.

Former FDIC Chair Martin Gruenberg, who is still a member of the FDIC board of directors, objected to the final settlement, issuing a statement in which he said:

As a result of its failure to follow required auditing standards, PwC did not detect that hundreds of millions of dollars of assets claimed by Colonial did not in fact exist, had been sold to others, or were worthless. If PwC had complied with auditing standards, it would have discovered the fraud, the fraud would have been stopped, and the damages to Colonial Bank would have been limited.

PwC issued a statement reading, "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."

About Author: David Wharton

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 15 years of experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@theMReport.com.
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