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Deloitte & Touche Agrees to Pay $312 Million in S&L Settlement

March 15, 1994|JERRY KNIGHT | THE WASHINGTON POST

WASHINGTON — Deloitte & Touche, one of the nation's biggest accounting firms, agreed Monday to pay the government $312 million to settle charges that it failed to properly audit several savings and loan associations, contributing to failures that cost taxpayers hundreds of millions of dollars.

The settlement is the second-largest by an accounting firm for its part in the costly S&L debacle, exceeded only by the $400 million paid by Ernst & Young.

The Resolution Trust Corp. and the Federal Deposit Insurance Corp. had filed 18 lawsuits against Deloitte & Touche for alleged auditing lapses and were investigating additional cases that had not yet reached the courts.

The regulators' charges against the firm involved some of the most costly S&L failures ever, including Franklin Savings Assn. of Ottawa, Kan., which lost hundreds of millions of dollars by speculating in exotic financial instruments, and Columbia Savings and Loan of Beverly Hills, which lost massive amounts on deals with convicted junk bond financier Michael Milken.

What RTC officials described as "a global settlement" ends pending cases and potential new ones as well as settles a disciplinary case brought by the Office of Thrift Supervision.

Deloitte & Touche is to pay $236.8 million to the RTC and another $75.2 million to the FDIC. The company also agreed to abide by an OTS order calling on it to change S&L auditing practices, according to the agencies.

Officials of Deloitte & Touche, which had denied wrongdoing in all the cases, described the settlement as "fair for both the government and for the firm" and said it "will have no effect on the financial viability of our firm."

Deloitte said "a substantial portion" of the cost will be paid by insurance companies that provided professional liability coverage, but it said the exact amount will not be known for several months.

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