Auditors Face Lawsuit for Colonial BancGroup Failure

Auditors Face Lawsuit for Colonial BancGroup Failure

An Alabama federal judge has ruled that auditors PricewaterhouseCoopers LLP and Crowe Horwath LLP must face a $2.2 billion lawsuit. The lawsuit is brought by regulators who allege the auditors overlooked a mortgage fraud scheme that resulted in the failure of Colonial BancGroup Inc. The judge said the damages to the Federal Deposit Insurance Corp. (FDIC) are too complicated, so it would be impossible to impose interest against the auditors once the lawsuit goes to trial.

Auditors Lawsuit Brought by FDIC

The bankruptcy trustee for Colonial BancGroup and the FDIC claim that auditors from PricewaterhouseCoopers LLP and Crowe Horwath LLP failed to correct irregularities and fake collateral from its biggest customer, Taylor Bean & Whitaker Mortgage Group, causing losses for Colonial BancGroup and its subsidiary Colonial Bank.

The auditors claim they can’t be held liable for the losses but U.S. District Judge Barbara Jacobs Rothstein has rejected the claim, stating the case would go forward.

Colonial BancGroup Damages Vary

On both sides of the case, the estimates of the damages as a result of the bank failure vary widely. Judge Rothstein wrote that damages are “uncertain and difficult to ascertain” and the consequences could be in the hundreds of millions.

Call an Investment Fraud Attorney Today

If you are looking for an investment fraud attorney to review your rights and options, the securities lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million for clients for wrongful actions.

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Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. today to schedule an appointment or consultation to review your rights and options.