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PriceWaterhouse Sued for $1 Billion

MIAMI (CN) - The Taylor, Bean & Whitaker Plan Trust sued PriceWaterhouseCoopers for $1 billion, claiming the accounting firm negligently gave Colonial BancGroup clean audits for five years, allowing insiders at Colonial Bank and at Taylor Bean & Whitaker Mortgage Group to "loot" Taylor Bean's account of "tens of millions of dollars per day" - more than $1 billion in all.

PriceWaterhouseCoopers certified that Colonial's financial statements were "free of material misstatement" for the years 2004-2008, the Taylor Bean & Whitaker Plan Trust claims in its lawsuit in Miami-Dade County Court.

Taylor Bean says it relied upon PwC's audits, but "PwC's certifications were false. Colonial's financial statements were grossly misstated and concealed a multibillion-dollar hole that PwC would have and should have discovered had it not been negligent.

"Had PwC done its job," the complaint continues, "it would have discovered a massive fraud being perpetrated by certain of Colonial's employees and executives at Taylor, Bean & Whitaker Mortgage Group ('TBW') against TBW. These fraudsters (the 'Looters') acted adverse to, and without the authority of, TBW to misappropriate billions of dollars from TBW. Innocent directors of TBW were not involved in the Looters' fraud and could and would have stopped the fraudulent transactions with Colonial if PwC would have done its job."

During this "increasingly brazen and gigantic fraud against TBW, PwC certified the existence of more than a billion dollars of Colonial assets that did not exist, had been sold to others, or were worthless," according to the lawsuit.

Former Taylor, Bean and Whitaker Chairman Lee Farkas is serving a 30-year prison sentence for conspiracy and bank, securities and wire fraud. A federal jury convicted him of all 14 counts against him in April 2011. U.S. District Judge Leonie Brinkema handed down the long sentence after telling Farkas that she did not "detect one bit of actual remorse" from him.

The Daily Bankruptcy Review reported this week that Farkas appealed his sentence, claiming he is actually innocent and that his teams of attorneys did a poor job.

The gigantic fraud caused the collapse of both Colonial Bank and Taylor, Bean & Whitaker's mortgage group.

Colonial Bank's failure was the 6th largest in U.S. history, and cost the FDIC $2.8 billion, according to publicly available information.

In the new lawsuit, the TBW Plan Trust claims that "TBW Chairman Lee Farkas and TBW Treasurer Desiree Brown, among other of the Looters, conspired with two MWLD [Mortgage Warehouse Loan Division] employees, Catherine Kissick (a senior vice president and head of the MWLD) and Teresa Kelly (operations supervisor reporting to Kissick) to loot TBW of its assets." (Parentheses, but not brackets, in complaint.)

Kissick was sentenced in July 2011 to 8 years in prison.

Brown was sentenced to 6 years, and Kelly to 3 months.

According to the new lawsuit: "At least as early as 2002, Kissick and Kelly allowed overdrafts to be paid out of the TBW master operating account with Colonial's MWLD by tens of millions of dollars per day. These overdrafts were used by the Looters to cover up their fraud."

TBW seeks more than $1 billion in damages, for negligent misrepresentation. Its lead counsel is Steven Thomas, with Thomas Alexander & Forrester, of Venice, Calif.

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