Starting Monday, PwC will go trial in Florida over a financial crisis-era case. The plaintiff is the bankruptcy trustee for Taylor Bean and Whitaker Mortgage Corp, who is seeking $5.5 billion in damages, claiming that "PwC was negligent in not detecting a massive fraud scheme that brought down Taylor Bean and helped trigger the 2009 collapse of Colonial Bank." PwC was the auditor of Colonial Bank. Deloitte served as TBW's auditor and settled their lawsuit with the bankruptcy trustee in 2013. Yes, these cases are somehow still going on.
The plaintiff is represented by renowned attorney Steven Thomas who has made a career for himself chasing suing large accounting firms. He sums up the case this way:
“This is basically holding an auditor responsible for its failure to do its job,” said Steven W. Thomas, an attorney representing Neil Luria, the Taylor Bean trustee. […] The trustee representing Taylor Bean creditors contends PwC should have uncovered the fraud and thus prevented the losses. The fraud “was staring them in the face,” Mr. Thomas said. In court papers, the trustee argues that PwC, among other things, failed to audit billions of dollars of transactions, failed to certify assets and relied on unsigned contracts.
Yikes. That sounds like some pretty damning evidence. PwC's lawyer is confident her case, too, however, I'm not sure she should be:
Elizabeth Tanis, an attorney for PwC, said the accounting firm did its job properly, and is “confident that a jury will understand the applicable rules and standards in this case and decide accordingly.”
I laughed out loud when I read this. Will they really understand? There's plenty of debate among people who do know the rules and standards about what an auditor's responsibility is. But she thinks a jury…of Americans…FROM FLORIDA will be able to understand them? I'd be more confident if the case were being decided by Last Week Tonight's all-dog Supreme Court than a jury of average Floridians.
Good luck, to both sides. This will be fun.