Academic journal article Journal of Accountancy

FDIC Claim Does Not Revive Statute of Limitations Period

Academic journal article Journal of Accountancy

FDIC Claim Does Not Revive Statute of Limitations Period

Article excerpt

The 10th Circuit Court of Appeals ruled that when the Federal Deposit Insurance Corporation takes over a bank's suit against its accountants but the applicable state's statute of limitations period has expired, the statute of limitations period provided by federal law does not revive the action.

The decision involved the FDIC's takeover of Territory Savings and Loan. Regier, Carr and Monroe prepared audit reports for Territory for the fiscal yearends June 30, 1983, June 30, 1984, and June 30, 1985--a period in which Territory pursued a growth strategy supported by aggressive lending and trading on the futures market.

But during this time Territory's accounts went unreconciled to the general ledger, security interests were not filed in a proper and timely manner, delinquent loans went unrecorded as such and loans to officers and directors exceeded reguatory limits.

In a management letter dated December 27, 1985, the accounting Firm notified Territory's board of directors of various mismanagement issues affecting the savings and loan. The FDIC, however, claimed this notice had come approximately six months after $12 million of speculative trading losses already had occurred at Territory.

Regier asserted that December 20, 1985--the last date an unsecured securities trade occurred-- was the date the statute of limitations began to toll. …

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