PwC reaches $335M settlement on audit of failed bank, admits no guilt
Nearly a decade after the collapse of Colonial Bank in Alabama, the Federal Deposit Insurance Corp. has reached a $335 million settlement with PricewaterhouseCoopers, which was accused of negligence in its role as the bank’s external auditor.
The settlement agreement was not available on Friday, but FDIC board member Martin Gruenberg issued a written statement saying that he voted against approving the deal because it does not include a written admission of liability by PwC.
The FDIC’s other board members — Chair Jelena McWilliams, Consumer Financial Protection Bureau Director Kathy Kraninger and Comptroller of the Currency Joseph Otting — all voted to approve the settlement.
PwC said in a written statement that the FDIC’s claims have been settled to the “mutual satisfaction” of both parties.
Colonial's August 2009 failure cost the FDIC’s Deposit Insurance Fund nearly $3 billion, according to the agency’s most recently available estimate.
The bank’s demise was precipitated by what the agency described as a massive fraud by Colonial’s largest mortgage banking customer, Taylor Bean & Whitaker Mortgage.
PwC served as the Montgomery, Ala., bank’s external auditor. In a lawsuit filed in 2012, the FDIC alleged that the accounting giant’s audit of Colonial’s financial statements fell short of applicable professional standards in several respects. If PwC had performed the audit work properly, it would have discovered the fraud by Taylor, Bean & Whitaker, the agency argued.
The case went to trial in Alabama in 2017, and U.S. District Judge Barbara Rothstein subsequently ordered PwC to pay $625 million in damages.
The settlement agreement announced Friday heads off the possibility of an appeal by PwC that could have overturned the district court’s ruling or reduced the size of the judgment.
Gruenberg was the FDIC’s acting chair when the agency sued PwC. He said Friday that the firm’s professional negligence contributed directly to the failure of Colonial Bank and large losses to the Deposit Insurance Fund.
Last April, the FDIC settled professional negligence claims Crowe Horwath, which served as Colonial’s internal auditor, for $60 million.
When Colonial failed, the FDIC was appointed as receiver, and the agency entered into an agreement with BB&T to assume all of the bank’s deposits. The Winston-Salem, N.C., company also entered into a loss-sharing agreement with the FDIC for $15 billion of Colonial’s assets.