Mortgage exec gets 30 years for $3 billion fraud

AP News
Posted: Jun 30, 2011 1:21 PM
Mortgage exec gets 30 years for $3 billion fraud

An executive convicted of orchestrating a $3 billion fraud as chairman of one of America's largest private mortgage companies was sentenced Thursday to 30 years in prison.

Federal prosecutors in northern Virginia had sought a life sentence for Lee. B. Farkas, former chairman of Florida-based Taylor Bean & Whitaker. They called the case against him one of the most significant arising from the nation's financial meltdown.

A federal jury in Alexandria convicted Farkas in April of all 14 counts, including securities fraud and conspiracy.

Farkas testified that he had done nothing wrong.

The fraud began in 2002 and took multiple forms, prosecutors said. Taylor Bean overdrew its main account with Colonial Bank by several million dollars and eventually double- and triple-pledged mortgages it held to a variety of investors. Prosecutors also alleged that Taylor Bean sold hundreds of million in worthless mortgages to Colonial.

Prosecutors say Farkas led a lavish lifestyle that included multiple houses _ including one on Key West _ several dozen classic cars, a private jet and a seaplane.

Farkas, of Ocala, Fla., is the last of seven employees and executives from Taylor Bean and from Colonial to be sentenced. Taylor Bean collapsed in 2009 when the scheme unraveled, putting 2,000 employees out of work.

Prosecutors say Colonial and two other major banks _ Deutsche Bank and BNP Paribas _ were collectively cheated out of nearly $3 billion during a scheme that spanned more than seven years.

They say Farkas and his co-defendants 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). Neither Taylor Bean nor Colonial ever received any TARP money, even though TARP at one point gave conditional approval to a payment of roughly $550 million, investigators say.

Farkas said during his trial that he didn't have details or knowledge of many aspects of the various fraud schemes. His lawyer said the six Taylor Bean and Colonial executives who testified against Farkas cooperated with the government to secure lighter sentences for themselves.