ALEXANDRIA, Va. (CN) – A federal judge on Friday sentenced the former treasurer of Taylor, Bean & Whitaker to six years in prison and the former president to 2 1/2 years for their roles in what prosecutors have called one of the largest bank frauds in history.
The more than $2.9 billion fraud scheme contributed to the failures of Colonial Bank and Taylor Bean, previously one of the largest privately held mortgage-lending companies in the United States.
U.S. District Judge Leonie Brinkema handed down the sentences against former Taylor Bean treasurer Desiree Brown and former president Raymond Bowman.
Brown, 45, of Hernando, Fla., pleaded guilty in February 2011 to one count of conspiracy to commit bank, wire and securities fraud. Bowman, 45, of Braselton, Ga., pleaded guilty a month later to the same charge as well as one count of making false statements to federal agents.
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.
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.
Other alleged co-conspirators who have pleaded guilty to their role in the fraud, include former Taylor Bean CEO Paul Allen and former 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.
Court documents showed that Bowman and Brown participated in the scheme from 2003 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.
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).