Taylor, Bean & Whitaker's former chairman, Lee Farkas, was sentenced last week to 30 years in prison for leading a $2.9 billion fraud scheme that brought down the top-ranked nonbank lender, and its chief warehouse backer, Colonial Bank.
From 2002 through August 2009, Farkas and his co-conspirators, who have been sentenced to serve various prison terms ranging from three months to eight years, misappropriated more than $1.4 billion from Colonial Bank’s warehouse division and $1.5 billion from Ocala Funding, a mortgage lending facility controlled by TBW.
Farkas and his co-conspirators misappropriated the money to cover TBW’s operating expenses. The group transferred money between bank accounts to hide overdrafts, which grew to more than $100 million.
According to court documents, having the bank purchase from TBW more than $1.5 billion in what was later revealed as worthless mortgage assets, including loans that TBW had already sold to other investors, covered up the overdrafts and operating losses. Also, the bank purchased fake pools of loans that were supposedly being formed into MBS.
Farkas was also accused of masterminding a scheme where TBW sold at least $400 million of fictitious mortgages to Colonial Bank.
Farkas personally misappropriated more than $38.5 million from TBW and Colonial Bank to finance his lifestyle, including purchasing multiple homes, scores of cars, a jet and sea plane, and restaurants and bars, court documents said.
“Through his scheme, Lee Farkas and his co-conspirators victimized innocent people and in the process their actions led to the collapse of two major U.S. financial institutions, no doubt a contributing factor to the nation’s financial downturn,” said James McJunkin, assistant director of the Federal Bureau of Investigation’s Washington field office. “Today’s sentence does not make the victims whole, but it does punish the major architect of these crimes.”
Farkas was first arrested in June of 2010 and then charged in April of conspiracy to commit bank fraud, securities fraud and wire fraud.
TBW was in business for about two decades.
