Lee B. Farkas, the founder of one of the nation’s largest mortgage lending companies, was found guilty by a federal jury this week for masterminding a scheme that cheated investors and the government out of about $2.9 billion.
Farkas, 58, the former chairman of Taylor, Bean & Whitaker, was found guilty on 14 counts of securities, bank, and wire fraud and conspiracy to commit fraud.
Prosecutors called the case one of the “largest and longest bank fraud schemes in American history.” They say the scam led to the 2009 collapse of Colonial Bank.
During the trial, Farkas continued to deny any wrongdoing in the case.
Prosecutors say the scheme began in 2002 with Taylor, Bean & Whitaker executives hiding the firm's losses and overdrawing its Colonial Bank accounts by more than $100 million. Prosecutors say the company sold Colonial about $1.5 billion in “worthless” and “fake” mortgages, in which some had already been purchased by other investors.
Farkas and other executives also created a separate mortgage lending company--Ocala Funding--which sold commercial loans to big financial firms that were never paid back after Taylor, Bean & Whitaker collapsed, according to prosecutors.
Prosecutors also accused Farkas and other Taylor, Bean & Whitaker executives of persuading Colonial Bank to apply for $570 million in federal bailout funds through the Troubled Asset Relief Program (known as TARP).
“Today’s verdict ensures that Farkas will pay for his crime—an unprecedented scheme to defraud regulators during the height of the financial crisis and to steal over $550 million from the American taxpayers through TARP,” Christy Romero, the acting special inspector general for the TARP program, said in a statement.
Source: “Leader of Big Mortgage Lender Guilty of $2.9 Billion Fraud,” The New York Times (April 19, 2011)
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