Deloitte & Touche has agreed to pay $149.5 million to settle claims with the U.S. Department of Justice over its audit work at Taylor, Bean & Whitaker, a mortgage lender that went up in smoke in the financial crisis.

Deloitte was TBW’s independent auditor from 2002 through 2008, until the Federal Bureau of Investigation raided its headquarters in 2009 and the company ceased operations. Federal authorities have described a long-running $2.9 billion fraud scheme at TBW and Colonial Bank, which was audited by PwC, to conceal massive losses in mortgage loans. PwC is facing separate action in a suit brought by the Federal Deposit Insurance Corp., which backed Colonial when it failed.

The Justice Department says TBW was authorized to originate and underwrite mortgage loans insured by the Federal Housing Administration and the Department of Housing and Urban Development. Justice says TBW was engaged in a fraud that involved the sale of fictitious or double-pledged mortgage loans, causing its financial statements to hide severe financial distress.

According to the DOJ, Deloitte’s audits “knowingly deviated from applicable auditing standards,” therefore failing to detect the fraud and enabling the company to publish materially false and misleading financial statements. Officials also say “Deloitte’s audit failures extended to the specific financial arrangements through which TBW carried out its fraudulent conduct.”

Lee Farkas, former chairman of TBW, was convicted in 2011 on numerous counts of securities, bank, and wire fraud. Six other officers of TBW and Colonial Bank pleaded guilty to similar charges. DOJ called the scheme at TBW and Colonial one of the largest bank fraud schemes in history.

In a statement, Deloitte points out the convictions at the highest levels of management, describing the fraud as complex and collusive, aimed at misleading auditors and investors. “Deloitte & Touche is deeply committed to the highest standards of professionalism, and we stand behind this work that dates back over a decade,” the firm said. “Nonetheless, we are pleased to have resolved this matter to avoid the risk and uncertainty of protracted litigation.”

The DOJ says the settlement represents a resolution of allegations under the False Claims Act, not a finding of liability.

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