Deloitte settles Taylor Bean auditing lawsuits

Auditing provider was alleged to have missed queues that could have caught fraud earlier

Taylor Bean & Whitaker Mortgage Corp., one of the banks at the heart of the financial crisis has settled three lawsuits with Deloitte & Touche LLP over issues with the auditing practices they used on the run up to the financial crisis.

One of the lawsuits brought by Taylor Bean bankruptcy trustee Neil F. Luria was in arbitration as of this week, but has now been settled as part of an overall agreement related to auditing mistakes the firm made on the run up to the financial crisis. While the exact terms of the settlement have not been disclosed Deloitte spokesman Steven W Thomas, and Landon Cook said both said had achieved “mutual satisfaction.”

The other two settlements are expected to come to a close in court later this year.

At the heart of the first suit were allegations that Deloitte conducted audits of Taylor Bean in a sloppy fashion, missing mistakes that eventually caused the bank to go under. Taylor Bean’s former chairman, Lee Farkas, went to prison in 2011 as a result of fraud charges that alleged he had covered up a funding short fall for the bank.

According to The Wall Street Journal, Farkas’ trespasses eventually led to the collapse of Alabama’s Colonial Bank, which was one of the largest banks to go under during the financial crisis. Colonial provide financing to Taylor Bean that used mortgage agreements that had already been sold to other investors.

The fraud was discovered by a Deloitte audit in 2009, but this lawsuit argued the firm didn’t notice red flags that should have caught and mitigated the issues earlier.

The suit was one of many pending actions stemming from the fall out of the financial crisis. Banking giant J.P. Morgan is currently in talks with the Department of Justice over mortgage back securities that it sold ahead of the crisis, and has already paid over $18 million in fines in relation to mortgage fraud.

 

Associate Editor

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Chris DiMarco

Chris DiMarco, Associate Editor of InsideCounsel magazine, has a background in multimedia production with previous involvement in projects in which he developed and created content...

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