Federal Jury Finds Farkas Guilty in $2.9 Billion Fraud Scheme

An Alexandria, Virginia jury has found Lee Bentley Farkas guilty on all 14 charges arising from a seven year $2.9 billion fraud scheme that led to the collapse of Taylor, Bean and Whitaker Mortgage Corporation and Colonial Bank, according to an article in the Wall Street Journal. This is the first major criminal conviction of a mortgage executive stemming from the mortgage market collapse in 2008. Taylor Bean had been transformed into the largest non-bank mortgage lender in the country in 2009 under Farkas’ leadership and was one of the top sellers of mortgages to Freddie Mac. Likewise, Colonial Bank was one of the 25 largest banks in the U.S. in 2009.

According to the evidence presented, Farkas and others involved in the scheme misappropriated more than $1.4 billion from Colonial’s Mortgage Warehouse and roughly $1.5 billion from Ocala Funding, a mortgage lending facility controlled by Taylor Bean. The funds were used for the operating expenses of Taylor Bean, among other things. According to the article, Farkas was clearly the mastermind behind the largest bank fraud schemes in history but six others pleaded guilty for their involvement. At the conclusion of the 10 day trial, the federal jury found Mr. Farkas guilty of one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; four counts of wire fraud; and three counts of securities fraud. The sentencing portion of the trial for the mammoth scheme is set for July 1, 2011 and he faces a maximum prison term of 30 years for the conspiracy charge and for each count of bank fraud, 20 years for each count of wire fraud related to TARP, 30 years for each count of wire fraud affecting a financial institution and 25 years for each securities fraud count. The verdict assures that Farkas will be behind bars for the rest of his life.

As is typical in virtually every fraudulent scheme, Mr. Farkas not only misappropriated funds to support Taylor Bean but also used more than $20 million to support his lavish lifestyle which included several houses, entertainment, lots of expensive automobiles, a private jet, a sea plane, restaurants and bars.

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