Taylor, Bean & Whitaker's (TBW) former chairman and CEO Lee Farkas was sentenced today 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, 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 were found to have 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, the overdrafts and operating losses were covered up by having the bank purchase from TBW more than $1.5 billion in what was later revealed to be worthless mortgage assets, including loans that TBW had already sold to other investors. 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 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.