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FDIC's Gruenberg: $335M PwC settlement should have included liability admission


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FDIC's Gruenberg: $335M PwC settlement should have included liability admission

Federal Deposit Insurance Corp. director Martin Gruenberg dissented on a decision to fine PricewaterhouseCoopers LLP $335 million for professional negligence claims in relation to its audits on Montgomery, Ala.-based Colonial Bank.

Gruenberg said the settlement should have included a written admission of liability from PwC.

The FDIC filed a lawsuit against PwC in 2012 and a U.S. District Court judge ruled in January 2018 that PwC was negligent in its role as Colonial BancGroup Inc.'s external auditor by failing to uncover a scheme that caused the company to fail. The fraudulent scheme was perpetuated by Taylor Bean & Whitaker Mortgage Corp. when it overdrew its account at Colonial Bank and then hid the issue by selling Colonial mortgages that had already been sold to other investors.

Taylor Bean ended up filing for bankruptcy in 2009. Colonial Bank became the 74th bank that failed in 2009 and its assets and deposits were assumed by Winston-Salem, N.C.-based BB&T Corp.

PwC then paid $625.3 million in damages to the FDIC for failing to uncover the fraudulent scheme. Gruenberg said that the FDIC alleged in its lawsuit that if PwC complied with required auditing standards, the fraud would have been uncovered and damages to Colonial Bank would have been minimized.

Gruenberg also said that as of Dec. 31, 2017, the FDIC had paid around $2.96 billion from its deposit insurance fund in relation to the failure of Colonial Bank.