On Wednesday the FDIC, as receiver for the Colonial Bank of Montgomery, Alabama, sued PricewaterhouseCoopers and Crowe Horwath in federal court in Montgomery, claiming that they committed professional malpractice and breach of contract by failing to detect that two Colonial employees helped the notorious (and defunct) mortgage lender Taylor Bean poke hundred-million-dollar holes in Colonial's balance sheet. (PwC was the external auditor and Crowe Horwath performed internal audits.)
"All the time that (Taylor Bean) was carrying out an increasingly brazen and costly fraud against Colonial, PwC and Crowe never realized that many hundreds of millions of dollars of bank assets did not exist, had been sold to others, or were worthless," wrote the FDIC's counsel at Bailey & Glasser and Mullin, Hoard & Brown. "Missing huge holes in Colonial's balance sheet and serious gaps in internal control, PwC and Crowe continued to perform auditing services for Colonial without ever detecting the (Taylor Bean) fraud. Had they performed their auditing work in accordance with applicable professional standards, they would have learned of the TBW fraud in time to prevent additional losses suffered by Colonial."
Lawyers representing customers of MF Global Holdings Ltd. added accounting firm PricewaterhouseCoopers LLP to a civil lawsuit against former executives of the failed securities firm, saying PwC failed to adequately audit MF Global's internal controls.
Now, back when we were all working ourselves into a lather over the what ifs, reason and precedent dictated even back then that PwC didn't really have much to sweat over.
Our friend Francine McKenna – who has been sporting a lady boner over the MF Global scandal from the get-go – once called the PwC/MF Global relationship "too cozy" for her taste, writing last year:
CME Group couldn’t have been hoodwinked like that if PwC had been doing its job all along. You can't circumvent controls unless there are none or there are holes. It was PwC’s job to review controls and the adequacy of policies and procedures to support them.
PwC lawyers probably aren't freaking out just yet, they already had in pari delicto work in their favor in 2011 after AIG shareholders came after them.
We're not sure how PwC's November could any more annoying right now, unless of course Twitter suddenly outlaws the use of hashtags.
Hang in there, guys, we're here if you need to talk!