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Deloitte & Touche Settles FCA Suit for $149.5M

Posted  March 1, 2018

By the C|C Whistleblower Lawyer Team

Deloitte, the world’s largest accounting and consulting company,  has settled allegations arising from its role as an outside auditor of Taylor, Bean & Whitaker Mortgage Corp. (TBW), a failed mortgage broker that issue FHA and HUD secured loans. At one time, TBW was one of the largest privately held mortgage lending companies in the US, issuing over $35B in mortgages in 2007 alone. Under a HUD program, the Direct Endorsement Lender Program, TBW was authorized to originate FHA-insured mortgages. Defaults on FHA-insured mortgages allow the holder of the loan to submit claims to the US government to recoup losses resulting from the default. To maintain Direct Endorsement Lender status, a lender must submit annual audit reports to HUD on the lender’s financial statements and on its internal controls. Lenders must also annually certify compliance with certain HUD requirements.

Deloitte issued audit reports on behalf of TBW from 2002 to 2008. During that time, TBW engaged in a scheme involving the sale of fictitious or double-pledge mortgage loans, but TBW’s financial statements failed to indicate any distress. Deloitte has now settled allegations that its audits knowingly differed from applicable auditing standards and therefore failed to detect TBW’s fraudulent conduct and false financial statements. By failing to detect and report the misconduct, Deloitte’s audits allowed TBW to continue originating FHA insured mortgages until its collapse and bankruptcy in 2009.

Investigations into trouble at TBW began with a 2009 FBI raid on their Florida offices and suspension from the FHA program. The company laid off all of its 2,00 employees the day following the raid, and filed for bankruptcy within three weeks. The entire board resigned within the month. Since then, six executives have pled guilty for their involvement in the scheme. In 2011, Lee Farkas, the company’s majority owner, was sentenced to 30 years in prison.

Tagged in: FCA Federal, Housing and Mortgage Fraud,