In April 1999 Grant Thornton issued its audit opinion. In July 1998 the bank hired Grant Thornton to conduct the agreed-upon external audit. As a result, Keystone and the OCC formally agreed that the bank would retain a nationally recognized independent accounting firm to audit the bank's mortgage operations, assess the accuracy of its financial statements, and determine the validity of the bank's accounting for loans it purchased and bundled into securities. Using a standard rating system, the OCC gave the bank very low marks for its overall condition and management quality.īecause of Keystone's failure to address these concerns, the OCC initiated an enforcement action against the bank in May 1998. In a 1997 report, the examiners criticized the accuracy of the bank's statements and the effectiveness of the securitization program's management. By 1999 the bank's assets of approximately $100 million had apparently skyrocketed to about $1 billion.Įxaminers from the Office of the Comptroller of Currency (“OCC”) scrutinized the bank's records periodically from 1992 through 1999. Keystone hired asset servicers to collect the principal, interest, and penalties on the loans and to issue monthly checks of interest income to Keystone. The bank bundled the loans into securities and sold them to institutional investors. It then pooled these loans with loans it had originated itself. The bank bought subprime or high loan-to-value loans from large originators throughout the country. In 1992 the First National Bank of Keystone, then a small rural bank in West Virginia, sought to increase its revenues, launching an ambitious loan securitization program. We vacate the final decision and both orders, finding that when an accounting firm merely performs an external audit aimed solely at verifying the accuracy of a bank's books, it is not “participat” or “engaging” in “an unsafe or unsound practice in conducting the business” or “the affairs” of the bank, as those terms are used in 12 U.S.C. Grant Thornton also appeals the Comptroller's cease and desist order mandating that the firm comply with a host of conditions whenever it audits depository institutions. Grant Thornton, LLP, an accounting firm, appeals a final decision and order of the Comptroller of the Currency that requires the firm to pay $300,000 in civil penalties for recklessly failing to meet Generally Accepted Auditing Standards (“GAAS”) in its audit of the First National Bank of Keystone. Department of Treasury, argued the cause for respondent. Decided: February 08, 2008īefore: HENDERSON and TATEL, Circuit Judges, and WILLIAMS, Senior Circuit Judge.
OFFICE OF the COMPTROLLER OF THE CURRENCY, Respondent.
United States Court of Appeals,District of Columbia Circuit.
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