Jury convicts exec in $3B mortgage fraud case
By MATTHEW BARAKAT, AP Business Writer Matthew Barakat, Ap Business Writer
Tue Apr 19, 7:35 pm ET
ALEXANDRIA, Va. – A jury on Tuesday convicted the majority owner of what had been one of the nation's largest mortgage companies on all 14 counts in a $2.9 billion fraud trial that officials have said is one of the most significant prosecutions to arise from the nation's financial crisis.
Prosecutors said Lee Farkas led a fraud scheme of staggering proportions for roughly eight years as chairman of Florida-based Taylor Bean & Whitaker. The fraud not only caused the company's 2009 collapse and put its 2,000 employees out of work, but also contributed to the collapse of Alabama-based Colonial Bank, the sixth-largest bank failure in U.S. history.
The jury returned its verdict late Tuesday after more than a full day of deliberations.
Colonial and two other major banks — Deutsche Bank and BNP Paribas — were collectively cheated out of nearly $3 billion, prosecutors estimated. Farkas and his cohorts — six of whom entered guilty pleas to related charges and testified against him at the two-week trial in U.S. District Court — also tried to fraudulently obtain more than $500 million in taxpayer-funded relief from the government's bank bailout program, the Troubled Asset Relief Program (TARP).
While TARP at one point gave conditional approval to a payment of roughly $550 million, ultimately neither Taylor Bean nor Colonial received any TARP money, and investigators from that office, along with the FBI and other agencies, helped uncover the fraud.
Neil Barofsky, who recently resigned as TARP's special inspector general, has called the Farkas case "the most significant criminal prosecution to date rising out of the financial crisis."