PricewaterhouseCoopers LLP was negligent in connection with one of the biggest bank failures of the financial crisis, a federal judge has ruled, opening up the Big Four accounting firm to the potential of hundreds of millions of dollars in damages.
PwC violated auditing rules and didn’t take steps that could have detected a $2 billion fraud scheme that contributed to the 2009 failure of Alabama’s Colonial Bank, the judge ruled. The ruling Thursday came in a lawsuit brought against PwC by the Federal Deposit Insurance Corp.
U.S. District Judge Barbara Jacobs Rothstein will now consider separately whether damages should be imposed on PwC, and how much. She dismissed other FDIC allegations against PwC, as well as allegations of negligence that Colonial’s bankruptcy trustee brought against the accounting firm.
A PwC spokeswoman said the firm “looks forward to the damages phase where the FDIC will bear the burden of proof on what remains of their inflated damages claim.” She said the firm was “pleased” that the judge rejected the other claims.
Re-disseminated by The Asian Banker from Marketwatch.com