Trustee for Bankrupt Mortgage Firm Sues Deloitte for Audits That Failed to Detect Fraud

October 10, 2011 by David S. Seltzer

As a Miami mortgage fraud defense lawyer, I was interested to see a lawsuit that spotlights a less discussed area of mortgage fraud. As the Associated Press reported Sept. 26, two lawsuits allege that accounting giant Deloitte & Touche failed for years to detect fraud in its audits of Taylor Bean & Whitaker. Taylor Bean was a Florida mortgage company that committed billions of dollars’ worth of mortgage fraud between 2002 and its raid by federal agents in 2009. The firm’s collapse is blamed for the collapse of Colonial Bank, the sixth-largest bank failure in American history. Seven of its officers were criminally convicted. The lawsuit was brought by a bankruptcy trustee for Taylor Bean, whose job it is to recover money for creditors to the company. A Deloitte spokesperson said the lawsuits are without merit and that Taylor Bean lied to the accounting firm.

One of the two lawsuits is on audits of Taylor Bean; the other applies to Ocala Funding LLC, which purchased many millions of dollars’ worth of mortgages from Taylor Bean. Together, they cover a total of $7.6 billion in losses. Taylor Bean was accused of selling false mortgages, grossly overvaluing real mortgages, hiding overdrawn bank accounts and lying about liabilities. The lawsuits accused Deloitte of enabling this by continuing to certify the companies’ financial health despite signs that things were amiss. According to the article, those signs included analyzing large, questionable transactions just hours before the audit was due; accepting questionable verbal explanations from officers and accepting explanations that contradicted documents in Deloitte’s possession. An attorney for the plaintiffs said Deloitte abdicated its duty as a public watchdog. Analysts said the success of the lawsuit may depend on how well the bankruptcy trustee can separate him- or herself from the admittedly corrupt companies.

This story interests me as a south Florida mortgage fraud criminal defense attorney because it shows how widespread mortgage fraud was during the housing boom. People all up and down the mortgage lending chain were making lots of money in the middle of the last decade. For some people, this encouraged careless accounting or careless lending and borrowing practices. At the low end of the chain were people like “straw buyers” in mortgage schemes who lied about their income, often with the help of co-conspirators in a position to approve the loan. At the high end are people like the convicted Taylor Bean officers, who reportedly covered overdrafts by simply selling $1 billion worth of mortgages they did not own. With investors as well as homeowners now feeling financial effects of the housing downturn, I expect to see more allegations of fraud in my own work as a Fort Lauderdale mortgage fraud defense lawyer.

If accused of mortgage fraud, you should call Seltzer Law, P.A., www.cybercrimesdefense.com, as soon as possible. Based in downtown Miami, we represent clients around the state who are accused of serious crimes. To learn more about your legal options, send us an email or call 1-888-THE-DEFENSE (1-888-843-3333).

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