Fannie Mae-No Politics (FNMA)

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"PricewaterhouseCoopers had a job: detect fraud. And the second thing I'm going to prove to you is that PricewaterhouseCoopers failed to do its job," Thomas said. "When you don't do your job and people get hurt, it matters."

PricewaterhouseCoopers attorney Beth Tanis countered that the lawsuit was essentially an attempt by Taylor Bean's trustee to get the accounting firm to pay for money stolen in the fraud scheme. She said the perpetrators were insiders who took elaborate steps to cover up their crimes and that other audits at the bank and mortgage company also missed it.

"The criminals were so successful at hiding these transactions that nobody found the fraud," Tanis told jurors. "You can do an audit just right and not detect a fraud."

The scheme didn't come to light until a Colonial employee went to the FBI in July 2009, she added.

The trial before Miami-Dade Circuit Judge Jacqueline Hogan Scola is expected to last about six weeks. The plaintiffs include government-backed mortgage enterprises Freddie Mac, the Federal Home Loan Mortgage Corp. and Ginnie Mae, the Government National Mortgage Association.

Taylor Bean was once one of Colonial's biggest customers but began encountering financial difficulties, according to court documents. Taylor Bean's top executive, Lee Farkas, worked out a deal with a Colonial banker to use improper overdrafts to meet expenses and payroll. That later morphed into a scheme in which Colonial was buying billions of dollars in fake, nonexistent mortgages from Taylor Bean.

"This made these falsified transactions, these fraudulent transactions, look just like legitimate transactions at Colonial Bank," Tanis aid. "Those fraudulent transactions just blended right in."

But Thomas said he would prove that PricewaterhouseCoopers didn't look hard enough to uncover the scam at Colonial. That negligence, he said, allowed the fraud to flourish for years.

"They needed the gross negligence of an accountant," he said. "The evidence will show that accountant was the defendant, PricewaterhouseCoopers."

http://www.arkansasonline.com/news/2016/aug/10/accounting-firm-on-trial-for-audit-miss/?f=business