A federal grand jury has indicted the chief executive of what was once among the largest privately held mortgage lending companies for allegedly scheming to steal over half a billion dollars from the government's Troubled Assets Relief Program.
The indictment in Virginia alleges that Lee Bentley Farkas and co-conspirators carried out the scheme at their company, Taylor, Bean & Whitaker Corp. of Ocala, Fla., where Farkas was chief executive.
Farkas and his co-conspirators "tried to steal $553 million" through the TARP program, but investigators uncovered the alleged conspiracy before the theft could occur, Neil Barofsky, special inspector general for TARP, told a news conference.
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.
The indictment filed in Virginia alleges that Farkas and co-conspirators caused ColonialBancGroup, headquartered in Montgomery, Ala., to submit false information to the Federal Deposit Insurance Corp. and to the Securities and Exchange Commission when applying for funds from the Troubled Assets Relief Program.
In separate civil charges, the SEC said Farkas sold Colonial Bank more than $1.5 billion in bad mortgage loans and securities to Colonial Bank.
In regard to TARP, Farkas was responsible for a bogus equity investment that caused Colonial Bank to misrepresent that it had satisfied a requirement to qualify for TARP funds, the SEC said.
When the bank announced it had received preliminary approval for TARP funds, its stock price jumped 54 percent in two hours of trading, according to the SEC.
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