FCA Suit Says Accountant Was Negligent : Thrift Seeks $200 Million in Federal Court Action
Financial Corp. of America filed a lawsuit Tuesday seeking $200 million in damages from the accounting firm of Arthur Andersen & Co.
The suit, filed in U.S. District Court in Los Angeles, alleges that Andersen was “negligent in its performance” of duties for FCA between 1974 and 1984.
The suit alleges that Andersen failed to tell FCA’s senior management that there “were significant problems in FCA’s system of internal controls and record-keeping . . . or serious problems in the amount of FCA’s loan loss reserve.”
Andersen officials could not be reached for comment.
FCA alleges the problems caused by Andersen’s failure to alert management prompted several Securities and Exchange Commission inquiries.
The SEC later required FCA to restate its profits in 1984, the suit alleges. In response to the government inquiries and profit and loss restatements, depositors withdrew $6.3 billion from FCA during August and September, 1984, according to the suit. Federal regulators also forced former FCA chairman Charles Knapp to resign.
FCA also alleges that Andersen is to blame for a class-action suit filed against it by stockholders. FCA recently agreed to settle the suit for $32 million.
At one time, FCA was one of the fastest-growing thrifts in the country, growing in assets from $1.8 billion in 1980 to $6.6 billion in 1984.