Colonial Bank Execs Get Prison for Fraud Scheme

ALEXANDRIA, Va. (CN) - Two more executives embroiled in the massive $2.9 billion fraud scheme that led to the failures of Colonial Bank and Taylor, Bean & Whitaker were sentenced to prison terms on Friday.

Catherine Kissick, 50, will serve eight years after pleading guilty in March 2011 to one count of conspiracy to commit bank, wire and securities fraud. The Orlando-based woman had served as senior vice president and head of the Mortgage Warehouse Lending Division of Colonial Bank, which was one of the 25 largest banks in the United States before it went under in 2009.

Co-conspirator Teresa Kelly, 35, will serve three months. Kelly, of Ocoee, Fla., had worked as a Colonial Bank operations supervisor, reporting to Kissick. She pleaded guilty in March 2011 to one count of conspiracy to commit bank, wire and securities fraud.

Kissick and Kelly both admitted to conspiring with former Taylor Bean chairman Lee Bentley Farkas and others covered Taylor Bean's operating expenses by misappropriating more than $1.4 billion from Colonial Bank's mortgage division and about $1.5 billion from Ocala Funding, a mortgage lending facility the firm controlled.

Before it collapsed in August 2009, Taylor Bean was one of the largest privately held mortgage-lending companies in the United States.

Court documents showed that Bowman and Brown participated in the scheme from 2002 through August 2009.

After overdrawing on Taylor Bean's accounts, the co-conspirators concocted sham reports to conceal then hole and moved their deficit to Colonial Bank, prosecutors said.

A few months before the Taylor Bean bankruptcy, Colonial Bank applied for $553 million from the Troubled Assets Relief Program, giving false information to the Federal Deposit Insurance Corp. to get TARP funds, the Justice Department said.

"According to court documents, Kissick knew that Colonial BancGroup's TARP application relied upon false bank financial data; however, Kelly was not aware of this aspect of the fraud scheme," the government said in a statement.

Farkas faces sentencing on June 27 after a federal jury convicted him in April on 14 counts of fraud for his role in masterminding the scheme. He also faces a civil action filed by the Securities and Exchange Commission.

Last week, two other co-conspirators, former Taylor Bean treasurer Desiree Brown and former president Raymond Bowman, were sentenced to six years and 2 1/2 years, respectively. Other co-conspirators who have pleaded guilty to their role in the fraud, include former Taylor Bean CEO Paul Allen and former analyst Sean Ragland.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit