Deloitte & Touche has agreed to pay $149.5 million to settle potential False Claims Act liability arising from its audits of failed mortgage lender Taylor, Bean & Whitaker Mortgage Co., the U.S. Justice Department said.
The claims settled by the agreement are allegations and there has been no determination of liability, according to a Justice Department statement.
Taylor Bean was authorized to originate and underwrite mortgage loans insured by the Department of Housing and Urban Development’s Federal Housing Administration. It ceased activities in 2009 after an FBI raid and suspension. Federal authorities were investigating the activities of its chairman, Lee Bentley Farkas, was accused of misappropriating $38.5 million from Taylor Bean and other entities.
Deloitte & Touche served as Taylor Bean’s independent outside auditor and issued reports for fiscal years 2002 through 2008. Prosecutors alleged that Deloitte & Touche’s audit failures extended to the specific financial arrangements Taylor Bean used to carry out its fraudulent conduct. By failing to detect Taylor Bean’s fraud, Deloitte enabled it to continue issuing FHA-insured loans until the company collapsed and declared bankruptcy
A number of Taylor Bean executives were convicted on criminal charges.
With taxpayer dollars at stake, auditors must take their obligations seriously when auditing companies that participate in government programs,” said acting Assistant Attorney General Chad A. Readler for the Justice Department’s Civil Division. “When auditors fail to exercise their professional judgment, and make false statements that allow bad actors to remain in government programs and submit false claims to the government, there will be consequences.”
The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, HUD and HUD’s Office of Inspector General.