A grand jury has indicted the former CEO of what was once among the nation’s largest independent home-loan providers on 16 counts of fraud.
In documents filed in federal court in Virginia, prosecutors said Lee Bentley Farkas, the one-time chief executive of Taylor, Bean & Whitaker Mortgage Corp., caused more than $1.9 billion in losses through a scam that started as early as 2002.
Prosecutors said Taylor, Bean Whitaker and Colonial BancGroup Inc. engaged in a complex scheme to move money between accounts to disguise shortfalls.
“The day after sweeping funds, the conspirators would cause the money to be returned to the other account, only to have to sweep funds back into the master account later that day to hide the deficit again,” a court filing said.
Prosecutors also said Farkas and several unnamed co-conspirators sold more than $400 million in fake mortgage assets and hid hundreds of millions in troubled loans from regulators, creating the appearance of sales that never took place.
Further, the court filing said Farkas and his co-conspirators tried to access government TARP bailout funds by acquiring a major stake in Colonial BancGroup to get at $500 million in taxpayer money.
“The fraud alleged here was truly stunning in its scale and complexity,” Assistant Attorney General Lanny Breuer, who oversees the Justice Department’s criminal division, said yesterday.
Neil Barofsky, a special inspector general overseeing the government’s Troubled Asset Relief Program, added that “the scheme described is unprecedented in scope.”
The Securities and Exchange Commission yesterday filed separate civil charges against Farkas, alleging he sold more than $1.5 billion in fabricated or impaired mortgage loans.
Taylor, Bean & Whitaker was forced to stop making loans and went bankrupt in 2009 after an independent audit raised fraud concerns.