Grant Thornton, LLP v. FDIC (Fourth Circuit)

Our client, Grant Thornton, was engaged to audit the First National Bank of Keystone, a federally-insured bank that had been the subject of intense regulatory scrutiny for many years. Unbeknownst to the regulators who ordered Keystone to replace its prior auditors, Keystone senior management had long pursued a massive fraud. Bogus bookkeeping entries and wholesale falsification of bank records fraudulently concealed the true financial condition of the bank from the bank’s directors, shareholders, depositors, and regulators alike. The FDIC, which participated in overseeing Keystone, sought to impose on Grant Thornton massive liability for Keystone’s losses. At the same time, the FDIC had settled many of the same claims it pressed against Grant Thornton with a law firm that had participated in the fraud. Yet the district court credited Grant Thornton with a miniscule fraction of the settlement amount. Although the Fourth Circuit upheld the district court’s finding of liability against Grant Thornton, it reversed the district court with respect to the settlement credit, ordering that a larger credit be awarded.