The Federal Deposit Insurance Corp. is suing an Oak Brook, Illinois-based accounting firm for $21 million, claiming malpractice in auditing the financial statements of River Valley Bancorp., the holding company of the failed Valley Bank, formerly headquartered in Moline.
Because of this alleged malpractice, the firm of Crowe Horwath LLP failed to discover — and later failed to disclose — a scheme perpetrated by Valley CEO Larry C. Henson to mask the bank’s deteriorating financial condition in the years 2010 and 2011, according to the suit filed June 9 in U.S. District Court, Northern District, Chicago.
As a result, Henson continued to make loans that violated the FDIC’s 2009 “cease and desist order” for an additional two years, piling up more than $21 million in further losses by the time he was forced to resign in June 2013, the suit states.
“Had Crowe performed an audit in accordance with professional standards … Henson’s scheme to mask Valley’s deteriorating financial condition would have been discovered as much as two years earlier, and he would have been forced to resign — preventing further harm to the bank,” the suit states.
Instead, the misrepresentation continued until May 2013 when, in the course of a routine examination of Valley, FDIC examiners discovered Henson’s malfeasance, and he was forced to resign on June 4, 2013, the suit states.