I wrote last week in Forbes.com about PwC’s ongoing independence conflict in performing the Ally/ResCap independent foreclosure review. This conflict is disturbing, in particular, because this review is still going on. Bankrupt ResCap did not sign on to the settlement agreed to in January that put an unsatisfying and inconclusive end to the ignominious reviews.
But the bigger problem is the Fed did not comment on my findings. It’s not clear if the regulator gave PwC a waiver to do this consulting engagement because they determined, in error in my opinion, that the conflict was innocuous – PwC was the external auditor for ResCap for one of the two years of erroneous and, allegedly, fraudulent foreclosures under review – or because PwC never disclosed this conflict to the regulator.
Inquiring minds want to know…
I also have a lot of questions about the total, and by consultant, billing numbers for the disastrous reviews that have been reported.
How can Promontory, responsible for three foreclosure reviews, have billed twice what PwC billed for four reviews, more than any other consultant selected? (The consultants’ engagement letters posted by the OCC and Fed had “blob after blob of blackouts”, redactions where the billing rates should be. Did different banks get charged different rates for same services by consultants? Did Promontory charge more for senior partners to act as“coordinator” of conference calls between the “independent” consultants that did not include the regulators?)
How can Deloitte, responsible for the JP Morgan Chase foreclosure review, which was reportedly the cleanest of all the reviews with the lowest reported error rate, have charged more for that one engagement than PwC did for working on Citigroup, US Bank, SunTrust, and Ally/ResCap?
How can the overall bill for the foreclosure reviews be only $2 billion, the total reported to Senator Sherrod Brown as part of the Senate Banking Committee ongoing investigation into the consultants role? That total seems to be based on adding together only three consultants bills, when seven consultants covered a total of fourteen engagements. (Ernst & Young hasn’t reported any numbers and, yet, the firm performed two reviews independently – at problematic HSBC and MetLife – and was the primary, and probably very expensive, subcontractor to Promontory for the Bank of America. Navigant inherited the Aurora Bank engagement after Allonhill was disqualified and also performed the review of OneWest directly. Treliant Advisors was responsible for Sovereign Bank and Clayton Services is still working at EverBank.)
Finally, how can PwC testify to Congress that the firm only billed “about $425 million”, as if that were a final number, when the tab for Ally/ResCap alone, according to what ResCap told a judge in March, will be at least $300 million? (The ResCap foreclosure review is ongoing since, given the bankruptcy, ResCap did not sign up for the negotiated settlement announced in January.)
Read about, “Another Conflicted Foreclosure Review: PricewaterhouseCoopers and Ally/ResCap” at Forbes.com.