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Saturday, June 15, 2024 | Back issues
Courthouse News Service Courthouse News Service

‘Mastermind’ of $3B Bank Fraud Convicted in Va.

ALEXANDRIA, Va. (CN) - A federal jury convicted the former chairman of Taylor, Bean & Whitaker late Tuesday on 14 various counts of fraud and conspiracy, taking prosecutors' view that he masterminded one of the largest bank frauds in history.

At a July sentencing in Alexandria, Va., Farkas faces 30 years for the conspiracy charge, 30 years for each of six counts of bank fraud, 20 to 30 years for each of four counts of wire fraud, and 25 years for each count of securities fraud.

Six other alleged co-conspirators have pleaded guilty to their role in the fraud, including four former executives from Taylor Bean: CEO Paul Allen, president Raymond Bowman, treasurer Desiree Brown and analyst Sean Ragland. Two other guilty pleas came from former executives of Colonial Bank, which crumbled in the wake of the fraud. Catherine Kissick served as senior vice president and head of the bank's Mortgage Warehouse Lending Division; Teresa Kelly was former operations supervisor for the same division.

At the 10-day trial, the government showed that Farkas and his co-conspirators 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.

Farkas also personally misappropriated more than $20 million from his firm and Colonial to subsidize his lifestyle, "including purchasing multiple homes, scores of cars, a jet and sea plane, and restaurants and bars," according to a statement from the Justice Department.

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.

Colonial and Ocala bought about $1.5 billion each in what amounted to worthless mortgage loan assets, including loans that had already been sold to other investors and fake pools of loans supposedly being formed into mortgage-backed securities.

When Taylor Bean went under in August 2009, the shortfall accounted for $1.5 billion in debts. As a result of the fraud, Freddie Mac, Colonial Bank and Ocala Funding were holding worthless ownership interest in thousands of mortgage loans. Colonial Bank went under at the same time.

A few months before Taylor Bean the 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.

As part of the conspiracy, Colonial filed lied about its assets to the SEC and gave materially false financial data to the Government National Mortgage Association (Ginnie Mae).

Assistant Attorney General Lanny Breuer said in a statement that Farkas' "shockingly brazen scheme poured fuel on the fire of the financial crisis."

U.S. Attorney Neil H. MacBride said the jury held Farkas responsible for the financial ruin he left in his wake. "Today a jury convicted Lee Farkas of orchestrating one of the longest and largest bank fraud schemes in the country," MacBride said. "In 2008, Lee Farkas boasted that he 'could rob a bank with a pencil.' And he did just that. His staggering greed led him to steal nearly $3 billion from Colonial Bank and other investors. Farkas's mammoth fraud contributed to the toppling of a financial institution and the ripple effects were felt from Wall Street to Main Street."

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