MIAMI - Did one of the nation's top accounting firms fail to detect fraud in its audits of a bank leading to a loss of $5.5 billion that required a government bailout?
An answer will emerge in the jury trial of Taylor Bean
& Whitaker Plan Trust (TBW) v. PricewaterhouseCoopers (PWC), which began Aug. 9 in Circuit Court for
the Eleventh Judicial Circuit of Florida, with Judge Jacqueline Hogan Scola
TBW is the trustee for the bankrupt
Taylor Bean & Whitaker Mortgage Corp. that had been headed by Lee Farkas, now serving a
30-year sentence in federal prison for multiple counts of bank, securities and
According to case background, Colonial
Bank in part lent capital to TBW to originate mortgage loans. In
addition to Farkas, former TBW executives have served or are serving federal
prison sentences of 30 months to 72 months for multiple counts of financial
fraud involving Colonial Bank and the defunct mortgage-company’s swindling
am going to prove to you that PWC didn’t do its job of auditing Colonial Bank
to determine whether its financial statements were true,” said attorney Steven
Thomas of Thomas Alexander Forrester & Sorensen LLP, in an opening
statement, on Courtroom View Network’s webcast trial coverage, representing the
TBW Plan Trust for the bankrupt mortgage company that did business with the
now-failed Colonial Bank.
According to Thomas, PWC was negligent and ultimately violated public trust.
Thomas stated that the plaintiffs lost billions of dollars due to PWC’s
deficient audits of Colonial Bank that should have but did not detect TBW’s faulty
mortgage business with the bank. For example, some of TBW’s mortgages had fictitious
the TBW bankruptcy, its customers, creditors and the mortgage-company’s workers
took hard hits, Thomas said.
Tanis of King & Spalding LLP, PWC’s attorney, in opening comments, said
that the accounting firm had no contractual agreement with TBW nor involvement
in its audits.
She said that Deloitte & Touche, one of the nation's other big four accounting firms, was TBW’s auditor.
two days of testimony, Neil Luria, a federal court-appointed trustee for the TBW
plan, detailed the detection and operation of the mortgage-lenders’ alleged fraud.
Later, John Chandler of King & Spalding LLP, representing PWC, cross-examined
Miller Guy, a retired university accounting professor, was the next
witness for the plaintiffs. He in part testified, critically, about PWC’s
expertise in its audits of Colonial Bank.
to a MarketWatch report, PWC’s future viability could be at-risk.
unfavorable verdict in the trial currently playing out in a Florida state court
could inflict a significant monetary wound," the report stated. "That, combined with a possible
unfavorable judgment in another trial scheduled for federal court in Alabama in
February of 2017, and a third in a Manhattan federal court within the next
year, may be fatal”
trial is expected to last through September.