Auditors Face Suit as TBW Makes Headlines, Again

A suit filed Monday dispelled any notion that the Taylor Bean & Whitaker scandal ended with the lockup of the former ringleaders, according to multiple news reports. The trustee overseeing bankruptcy and liquidation proceedings for the now-defunct mortgage company went after auditors for failing to see red flags in their accounting processes.

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""Deloitte & Touche LLP"":http://www.deloitte.com/view/en_US/us/index.htm, the accounting firm responsible for audits at Taylor Bean & Whitaker, got slapped with suits on the hunt for $7.6 million in damages, according to the ""_Huffington Post_"":http://www.huffingtonpost.com/2011/09/27/deloitte-sued-mortgage-fraud_n_982804.html.

""_Reuters_"":http://www.reuters.com/article/2011/09/27/us-deloitte-mortgage-idUSTRE78P51E20110927 reported the complaint as alleging that Deloitte ""certified TBW as a solvent, viable company with accurate financial statements every year from 2001 to 2008.

""Despite Deloitte's credentials and expertise as one of the ├â┬ó├óÔÇÜ┬¼├ï┼ôBig 4' accounting firms, those statements ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and the rosy picture they depicted of TBW ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô were completely false,"" it added.

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Adds the _Post_: ""Deloitte missed this fraud because it simply accepted management's conflicting, incomplete and often last-minute explanations of highly-questionable transactions, even though those explanations made no sense and were flatly contradicted by documents in Deloitte's possessions.""

The news site quoted Steven Thomas, the attorney representing those filing suit against Deloitte, as saying of the auditors, ""They certainly did not do their job. This is one of those cases where the red flags are staring you in the face, and you've got to do a lot, and they did not.""

The _Post_ also reported Jonathan Gandal, a spokesperson with Deloitte, as dismissing the claims as ""utterly without merit"" in response.

Taylor Bean & Whitaker collapsed at the height of the crisis when an approximately $2.9-billion mortgage fraud plot deflated under pressure from other bad loans and securities. The ringleader, Lee Farkas, once chairman of the company, entered the spotlight when authorities fronted allegations about his culpability.

More recently, Farkas received a 30-year prison sentence from the courts, and continues to serve time alongside a slew other co-conspirators.

Deloitte isn't the only account firm to face investigation over alleged negligence during the lead-up to the financial crisis.

Also in the hot seat: ""Ernst & Young"":http://www.ey.com/, ""KPMG"":http://www.kpmg.com/us/en/pages/default.aspx, and ""Pricewaterhouse Coopers"":http://www.pwc.com/us/en/index.jhtml, which _Reuters_ says now see allegations about their auditing standards from investors in pursuit of billions of dollars lost during the financial crisis.