The founder of what was once one of the lenders of the nation's largest mortgage was convicted of fraud Tuesday for masterminding a scheme that defrauded investors and the government billions of dollars. It is one of the few successful prosecutions to emerge from the financial crisis.
After more than a day of deliberations, a federal jury in Virginia found Lee B. Farkas, former chairman of Taylor Bean Whitaker &, guilty of 14 counts of securities, bank and wire fraud and conspiracy to commit fraud. Mr. Farkas, 58, faces decades in prison for his role in the plot $ 2.9 billion, which prosecutors say was one of the largest and longest schemes bank fraud in U.S. history and led to the collapse of the 2009 Colonial Bank.
"There is no doubt that it is very important and a very important case," said Lanny Breuer, Assistant Attorney General Criminal Division Department of Justice.
The trial of 10 days was a rare victory for federal prosecutors in the wake of the financial mess. The Department of Justice has yet to lay charges against an officer who led a major Wall Street firm that led to disaster. An earlier case against the hedge funds of Bear Stearns resulted in an acquittal. Prosecutors have dropped their investigation into Angelo R. Mozilo, the former head of Countrywide Financial, which nearly collapsed under the weight of subprime home acidification.
Six other Taylor Bean Whitaker & executives - including its chief executive and former treasurer of the old - have already pleaded guilty. Some have agreed to testify against Mr. Farkas at his trial.
Mr. Farkas testified during the trial to defend his actions and denied any wrongdoing. A lawyer for Mr. Farkas has not responded to a request for comment.
The scheme began in 2002, prosecutors say, when Taylor Bean Whitaker moved & executives to hide losses of the enterprise, its secrecy Colonial overdrawing its accounts, at times over 100 million U.S. dollars. To cover the shares, prosecutors said that the lender has sold Colonial about 1.5 billion dollars in "worthless" and "false" mortgages, some of which had already been purchased by other institutional investors. The government, in turn, guarantees these fraudulent home loans.
In a plot related, Mr. Farkas and other executives created a separate mortgage operation, called Ocala funding. The subsidiary has sold commercial paper to large financial firms, including Deutsche Bank and BNP Paribas. When Taylor Bean Whitaker & collapsed, banks were not able to get all their money.
During the fraud, prosecutors said, he pocketed $ 20 million Farkas, he used to buy a private jet, several houses and a collection of vintage cars. "His shockingly brazen scheme pours oil on the flames of financial crisis," said Breuer.
With the credit crunch in full swing, Mr. Farkas and other Taylor Bean Whitaker & executives convinced Colonial to apply for 570 million dollars in bailout funds from the federal government through the Troubled Asset Relief Program, or TARP.
The Treasury Department has approved the bailout fund, provided that Colonial has been able to raise $ 300 million in private funds. The Taylor Bean Whitaker & executives falsely led to believe that the bank had investors lined up. Ultimately, the government has not given any money at Colonial.
Shortly thereafter, in August 2009, Colonial filed for bankruptcy, along with Taylor Bean Whitaker & failed.
"Today's verdict ensures that Farkas will pay for his crime - a scheme to defraud unprecedented regulators during the height of the financial crisis and stealing more than $ 550 million of U.S. taxpayer through the TARP "Christy Romero, Acting Special Inspector General for the TARP program, said in a statement.
After more than a day of deliberations, a federal jury in Virginia found Lee B. Farkas, former chairman of Taylor Bean Whitaker &, guilty of 14 counts of securities, bank and wire fraud and conspiracy to commit fraud. Mr. Farkas, 58, faces decades in prison for his role in the plot $ 2.9 billion, which prosecutors say was one of the largest and longest schemes bank fraud in U.S. history and led to the collapse of the 2009 Colonial Bank.
"There is no doubt that it is very important and a very important case," said Lanny Breuer, Assistant Attorney General Criminal Division Department of Justice.
The trial of 10 days was a rare victory for federal prosecutors in the wake of the financial mess. The Department of Justice has yet to lay charges against an officer who led a major Wall Street firm that led to disaster. An earlier case against the hedge funds of Bear Stearns resulted in an acquittal. Prosecutors have dropped their investigation into Angelo R. Mozilo, the former head of Countrywide Financial, which nearly collapsed under the weight of subprime home acidification.
Six other Taylor Bean Whitaker & executives - including its chief executive and former treasurer of the old - have already pleaded guilty. Some have agreed to testify against Mr. Farkas at his trial.
Mr. Farkas testified during the trial to defend his actions and denied any wrongdoing. A lawyer for Mr. Farkas has not responded to a request for comment.
The scheme began in 2002, prosecutors say, when Taylor Bean Whitaker moved & executives to hide losses of the enterprise, its secrecy Colonial overdrawing its accounts, at times over 100 million U.S. dollars. To cover the shares, prosecutors said that the lender has sold Colonial about 1.5 billion dollars in "worthless" and "false" mortgages, some of which had already been purchased by other institutional investors. The government, in turn, guarantees these fraudulent home loans.
In a plot related, Mr. Farkas and other executives created a separate mortgage operation, called Ocala funding. The subsidiary has sold commercial paper to large financial firms, including Deutsche Bank and BNP Paribas. When Taylor Bean Whitaker & collapsed, banks were not able to get all their money.
During the fraud, prosecutors said, he pocketed $ 20 million Farkas, he used to buy a private jet, several houses and a collection of vintage cars. "His shockingly brazen scheme pours oil on the flames of financial crisis," said Breuer.
With the credit crunch in full swing, Mr. Farkas and other Taylor Bean Whitaker & executives convinced Colonial to apply for 570 million dollars in bailout funds from the federal government through the Troubled Asset Relief Program, or TARP.
The Treasury Department has approved the bailout fund, provided that Colonial has been able to raise $ 300 million in private funds. The Taylor Bean Whitaker & executives falsely led to believe that the bank had investors lined up. Ultimately, the government has not given any money at Colonial.
Shortly thereafter, in August 2009, Colonial filed for bankruptcy, along with Taylor Bean Whitaker & failed.
"Today's verdict ensures that Farkas will pay for his crime - a scheme to defraud unprecedented regulators during the height of the financial crisis and stealing more than $ 550 million of U.S. taxpayer through the TARP "Christy Romero, Acting Special Inspector General for the TARP program, said in a statement.
