Lee Farkas, ex-chairman of Taylor, Bean and Whitaker (TBW), was convicted in a US federal court for conspiracy to commit bank, wire and securities fraud and related charges, reported the Associated Press.
The fraud caused TBW’s collapse in 2009, with over 2,000 workers losing their jobs. It also contributed to the collapse of Alabama-based Colonial Bank, the sixth-largest bank failure in US history.
Prosecutors said that Colonial and two other major banks – Deutsche Bank and BNP Paribas – were cheated out of nearly £1.78bn by Farkas, who was convicted in court yesterday evening.
Assistant Attorney, Lanny General Breuer said: “Lee Farkas masterminded one of the largest bank fraud schemes in history.
“His shockingly brazen scheme poured fuel on the fire of the financial crisis. It not only led to the downfall of TBW, one of the largest private mortgage lending companies in the United States, but also contributed to the failure of one of the country’s largest commercial banks.”
Farkas, who testified in his own defence at the 10-day trial, insisted he had done nothing wrong. He claimed he was unfamiliar with details or knowledge of many aspects of the various fraud schemes.
According to prosecutors, Farkas and his co-conspirators engaged in a scheme that misappropriated more than £0.85bn from Colonial Bank and £0.92bn from Ocala Funding, a mortgage lending facility controlled by TBW.
They used the money to cover cash shortfalls at TBW, said prosecutors.
The court heard how Farkas also tried to fraudulently obtain more than £305m in taxpayer-funded relief from the government’s bank bailout program, the Troubled Assets Relief Program (TARP).
While TARP at one point gave conditional approval to a payment of roughly £336m, ultimately neither TBW nor Colonial received any TARP money.
Farkas’s lawyer, Bruce Rogow, said he would appeal the verdict. Farkas is due to be sentenced on 1 July.
