Deloitte & Touche LLP settled lawsuits by Taylor, Bean & Whitaker Mortgage Corp.’s bankruptcy trustee and Deutsche Bank AG over $7.6 billion in losses associated with the collapse of the mortgage lender, a lawyer for the plaintiffs said.
Bankruptcy trustee Neil Luria and Taylor Bean’s Ocala Funding unit sued Deloitte in September 2011 over claims the accounting firm failed to detect a fraud that led to losses at the defunct lender. Deutsche Bank, which filed its complaint in December 2011, invested in asset-backed notes issued by Ocala based on Deloitte’s audits of Taylor Bean’s financial statements from 2005 through July 2009.
“The cases were settled to the mutual satisfaction of the parties,” plaintiffs’ attorney Steven Thomas said in a phone interview. Settlement terms are confidential, he said.
The settlement comes ahead of an Oct. 21 trial in the case. Taylor Bean, once the 12th-largest U.S. mortgage lender, collapsed in 2009 after federal regulators began probing a fraud that involved fake mortgage assets, targeted the federal bank bailout program and contributed to the failure of Montgomery, Ala.-based Colonial Bank.
Lauren Mistretta, a Chicago-based spokeswoman for Deloitte, didn’t immediately respond to phone and email messages seeking comment on the settlement.
Deloitte, one of the so-called Big Four accounting firms, allegedly ignored red flags in Taylor Bean’s books, allowing the lender’s former chairman, Lee Farkas, to orchestrate a fraud that toppled the company, according to the complaints. Farkas was sentenced in June 2011 to 30 years in prison for his role. Six conspirators, including former chief executive Paul Allen, pleaded guilty and
Ocala filed for Chapter 11 bankruptcy protection in Florida in July 2012 listing assets and debt of more than $1 each billion in court documents.
