FDIC resolves bank auditing claim for $335 million

Federal Issues FDIC Settlement Mortgages Fraud Courts

On March 15, the FDIC announced a settlement with an accounting firm to resolve a professional negligence action stemming from allegations that the firm failed to detect a massive mortgage fraud in its audits of an Alabama-based bank that failed in 2009. According to a July 2018 order entered by the U.S. District Court for the Middle District of Alabama, the court originally ruled that the accounting firm owed more than $625 million in damages for negligent audits. The court’s findings, among other things, determined that the firm “did not design its audits to detect fraud,” which prevented it from detecting the mortgage fraud scheme.

One member of the FDIC Board, Martin J. Gruenberg, released a statement noting that he “voted against authorizing the settlement because the settlement did not include a written admission of liability” from the accounting firm.