Today, federal district judge Barbara Jacobs Rothstein ruled that PwC, which in December was found negligent in detecting the fraud scheme at the bank, must pay the FDIC $625.3 million in damages, the full amount the FDIC had requested – and one of the largest awards for accounting malpractice. Colonial, the 25th largest bank in the US at the time, collapsed unceremoniously in 2009, brought down in part by a $2.3 billion fraud scheme it had going on with its biggest customer, Taylor Bean & Whitaker Mortgage, the 12th largest mortgage lender in the US, which had collapsed shortly before the bank. Rothstein had found PwC liable for negligence in December, after a non-jury trial, and tried the damages issue in March, also without a jury. “While there is a good argument that there should be transparency in matters as important as auditor competence in financial reporting,” Jakubowski told MarketWatch, “that policy objective will generally take a back seat to the bankruptcy objective of maximizing the value of the bankruptcy estate.”

PwC’s lead attorney in the case, Phil Beck of the law firm Bartlit Beck, told MarketWatch via a spokeswoman on Monday, “PwC US is disappointed by today’s ruling and we don’t believe the FDIC is entitled to the recovery of any damages in this case in light of the Court’s prior findings that numerous employees at Colonial actively and substantially interfered with our audits. In November 2012, it sued PwC as the outside auditor of Colonial, accusing it of negligently auditing the bank from 2003 to 2005 and in 2008. U.S. District Judge Barbara Jacobs Rothstein ruled last December the accounting firm was negligent in failing to discover the fraud at Colonial, and on Monday she sided with the Federal Deposit Insurance Corp., the failed bank’s receiver, on the proper level of damages.
A US federal judge orders PricewaterhouseCoopers to pay US$625.3 million compensation to Federal Deposit Insurance Corp. The judge rules PwC negligently caused losses to F.D.I.C. by failing to uncover fraud during audits of Colonial BancGroup. Colonial, one the nation's 25 largest banks, and Taylor, Bean & Whitaker, the 12th-largest mortgage broker in the US, both collapsed in August 2009 as a result of fraud between the two. F.D.I.C. was the receiver for Colonial.