Price Waterhouse Cooper (PwC)is being sued for a record $5.5bn for failing to detect fraud that led to a bank collapse during the global financial crisis, in a case that could bring more auditing firms into the line of fire, the Financial Times reported today. The case — the biggest against an auditing firm — has been filed in a Florida state court on behalf of a trustee of Taylor, Bean & Whitaker (TBW), a defunct mortgage underwriter, and accuses PwC of failing to catch a multibillion-dollar conspiracy between Lee Farkas, the company’s founder, and executives at Colonial Bank, an Alabama-based lender that supplied TBW with loans. PwC gave the bank’s parent, Colonial BancGroup, a clean audit opinion every year from 2002 to 2008. Colonial collapsed in 2009, becoming the sixth-largest U.S. bank failure in history. According to TBW’s trustee, PwC certified the existence of more than $1bn of Colonial Bank assets that did not exist, that had been sold or were worthless. Steven Thomas, lead trial lawyer for the trustee, described the case as “particularly egregious” given that Dennis Nally, who retired last month after eight years as PwC’s global chairman, told the Wall Street Journal in 2007 that the “audit profession has always had a responsibility for the detection of fraud.”
