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September 26, 2011

Deloitte US sued for $7.6bn over TB&W audits

Deloitte US is being sued for $7.6bn by investors who claim the firm failed to detect its former client’s, defunct Florida mortgage company Taylor Bean & Whitaker (TB&W), massive fraud, according to US media reports.

A TB&W bankruptcy trustee for creditor and Ocala Funding, a company that purchased hundreds of millions of dollars’ worth of mortgages from TB&W, filed two separate lawsuits at the Miami-Dade Circuit Court this week.

Deloitte spokesman Jonathan Gandal told the media that the company rejects the claims and they are “utterly without merit.”

Gandal said the blame for the fraud and losses should rest squarely on TB&W, Ocala Funding and Farkas.

TB&W fraud began in 2002 and the company collapsed in 2009 leading to the failure of Alabama based Colonial Bank.

The investors and creditors claim that Deloitte’s certifications of TB&W’s accounts were critical to maintaining its appearance as a legitimate, profitable business while the mortgage company was actually selling fake or grossly overvalued mortgages, misstating its liabilities and hiding overdrawn bank accounts.

Deloitte quit as TB&W’s auditor in 2009 prior to a federal investigation.

In the Ocala lawsuit it claims there was an e-mail exchange in which Deloitte auditors raise questions about various financial transactions. One of which is said to involve $6bn that was analysed just before the deadline to complete on an audit and the lawsuit claims that due to time constraints to certify the information and in the face of possible financial irregularities, Deloitte was negligent.


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