Farkas charges: bank, wire and securities fraud, conspiracy. The FBI is involved in the criminal case against the former TBW chief, though details of the charge were not immediately available.
WASHINGTON – A federal grand jury has indicted the chief executive of one of the largest privately held mortgage lending companies in the country for allegedly engaging in a fraud scheme that misappropriated $1 billion from the government’s Troubled Assets Relief Program and other targets.
Farkas is charged with conspiracy, bank fraud, wire fraud and securities fraud.
TBW, which originated and purchased billions of dollars in new residential loans annually, filed for bankruptcy last August.
TBW began to experience cash flow problems in 2002 and in an effort to cover the shortfalls, the company devised a scheme to misappropriate funds from a bank and eventually did so as well from the U.S. government, according to the indictment.
Former TBW chief Lee Farkas arrested, charged with fraud
(Original article) Lee Farkas was arrested in Ocala on Tuesday and charged with securities fraud.
Farkas, 57, is the former chairman of Taylor, Bean & Whitaker Mortgage Corp., the Ocala-based industry giant that closed in August amid trouble with federal agencies. He was booked into the Marion County Jail about 8:30 p.m. Tuesday.
The FBI is involved in the criminal case, though details of the charge were not immediately available.
Farkas will be held without bail, and federal officials are scheduled to pick him up this morning.
The arrest is the latest chapter in a story that sprang to life almost one year ago.
Taylor Bean once oversaw more than $30 billion worth of business annually. It was the third largest lender underwriting Federal Housing Administration-insured loans and was the fifth largest Freddie Mac securities issuer.
In early August, federal agents raided Taylor Bean’s headquarters and the Orlando branch office of Alabama-based Colonial Bank, which provided Taylor Bean with most of its short-term credit.
A day later, the FHA and Freddie Mac stopped allowing Taylor Bean to serve its mortgages. Ginnie Mae then suspended Taylor Bean from issuing mortgage-backed securities.
A day after that, Taylor Bean shut its doors, leaving nearly 1,000 people locally – and up to 2,000 employees nationwide – out of work.
Colonial Bank, in the meantime, froze Taylor Bean’s accounts; the bank’s parent company, Colonial BancGroup, was shut down nine days later.
- Austin L. Miller and Suevon Lee
The inspector general for the TARP program, which helped bail out the banking industry, has been involved in the federal investigations of Taylor Bean and Colonial from the start, though it has declined to provide details of its probes.
On Aug. 24, Taylor Bean filed for Chapter 11 bankruptcy, touching off another round of legal skirmishes.
Some ex-employees are trying to mount a class-action lawsuit against their former employer. One of Taylor Bean’s insurers has balked at paying potential claims. And the company’s new leadership, put in place under the guidance of the bankruptcy court, has alleged that Farkas withdrew more than $50 million from the business for his personal benefit and for companies he controlled. Farkas case ‘unprecedented scheme’ to bilk taxpayers, IG says.
Editors note: Fannie Mae and Freddie Mac own 98% of all home mortgage titles. Will they own it all now?