PwC faces paying $625m (£474m) in damages to US regulator, the Federal Deposit Insurance Corporation (FDIC), a record for an accounting firm, after a federal judge ruled the auditor had failed to detect fraud at Colonial Bank, which collapsed in 2009
At the time Colonial Bank was the 25th largest in the US, with more than $26bn in assets and 340 branches. Its failure followed the discovery of a complex fraud relating to non-existent mortgages and involving one of its biggest clients, broker Taylor, Bean & Whitaker (TBW).
The result was a loss estimated to be $2.8bn for the FDIC, which covers depositors when banks fail.
In a long running legal case Barbara Jacobs Rothstein, US district judge in Alabama, where the bank had its headquarters, had earlier accepted that PwC had been misled by TBW executives, several of whom received prison sentences for their part in the fraud.
However, the judge has also found PwC failed to conduct adequate checks and that this ‘negligence’ meant the FDIC is entitled to $625m in damages, covering PwC’s audits of Colonial from 2003 to 2005 and in 2008.
In a statement, PwC in the US said it intended to appeal the decision at the earliest opportunity.
TBW’s former auditor Deloitte agreed to pay $149.5m earlier this year to settle US government claims it also missed the fraud.
Report by Pat Sweet
