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Aug. 3 — Attorneys plan opening arguments in Miami Aug. 8 in a crisis-era case seeking $5.5 billion in damages from PricewaterhouseCoopers LLP.
The suit alleges that PricewaterhouseCoopers LLP failed to detect a fraud that led to the collapse of a Florida mortgage company and an Alabama bank that held securitized assets pegged to the mortgage firm's loans ( Taylor Bean & Whitaker Plan Trust v. PricewaterhouseCoopers LLP, Fla. Cir. Ct., 2013-33964 CA 01, opening arguments 8/8/16 ).
The bankruptcy trustee of the Ocala, Fla. company, Taylor, Bean & Whitaker Mortgage Corp., once a national leader in home mortgages, brought the suit in a Florida state court against PwC in 2013.
PwC, which disputes the allegations, was the external auditor of the holding company of the defunct bank, Colonial Bank, of Montgomery, Ala. Taylor, Bean and Colonial both went bankrupt in 2009.
Taylor, Bean's chairman and others—including two Colonial Bank employees—were convicted for their roles in the fraud (77 SLD, 4/21/11).
The Big Four auditing firm missed the “massive fraud” and “gross errors” in Colonial's financial statements that caused the mortgage company to suffer billions of dollars in losses, according to the suit brought by the Taylor, Bean & Whitaker Plan Trust.
According to the suit brought by Taylor, Bean bankruptcy trustee Neil Luria, “PwC failed to do its' job as a public watchdog by failing to detect a massive, multi-billion-dollar fraud and by giving it's seal of approval to Colonial's grossly misstated financial statements.”
The Miami court, with Judge Jacqueline Hogan Scola presiding, has slated up to seven weeks for the trial, a spokesman for the plaintiffs' attorneys told Bloomberg BNA Aug. 3. That includes jury selection, which took place this past week.
PwC's lead attorney in the case said in a prepared statement that the accounting firm didn't audit or perform other services for Taylor, Bean.
“With regard to the services performed for ColonialBancgroup, one of the targets of Taylor, Bean's fraud, PricewaterhouseCoopers did its job,” said Elizabeth Tanis, of King & Spalding LLP, Atlanta.
As professional audit standards make clear, Tanis said, “even a properly designed and executed audit may not detect fraud, especially in instances when there is collusion, fabrication of documents, and the override of controls, as there was at Colonial Bank.”
In 2011, Luria, as Taylor, Bean bankruptcy trustee, and the defunct mortgager's Ocala Funding unit brought a similar suit against the mortgage company's external auditor, Deloitte & Touche LLP. Deloitte and the Taylor, Bean trustee settled that suit in October 2013. Terms of the settlement weren't disclosed.
Deloitte also settled a lawsuit by Deutsche Bank AG. The German bank had invested in asset-backed notes issued by Ocala.
The lawsuits against Deloitte alleged $7.6 billion in losses.
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