After more than a day of deliberations, a federal jury in Virginia found Lee B. Farkas, the chairman of Taylor, Bean Whitaker, guilty on 14 counts of securities, bank and wire fraud and conspiracy to commit fraud. Mr. Farkas faces decades in prison for his role in the $2.9 billion plot, which prosecutors say was one of the largest and longest bank fraud schemes in American history and led to the 2009 collapse of Colonial Bank.
“There’s no question that it is very momentous and a very significant case,” Lanny Breuer, an assistant attorney general, said on Tuesday.
The 10-day trial was the rare win for federal prosecutors in the aftermath of the financial mess. The Justice Department has yet to bring charges against an executive who ran a major Wall Street firm leading up to the disaster. An earlier case against hedge fund managers at Bear Stearns ended in acquittal. Prosecutors dropped their investigation into Angelo R. Mozilo, the former chief executive of Countrywide Financial, which nearly collapsed under the weight of souring subprime home loans.
Six other Taylor, Bean Whitaker executives — including its former chief executive and former treasurer — have already pleaded guilty. Some agreed to testify against Mr. Farkas at his trial.
Mr. Farkas took the stand during the trial to defend his actions and deny any wrongdoing. A lawyer for Mr. Farkas did not respond to a request for comment.
The Securities and Exchange Commission has also sued Mr. Farkas. That case continues.
The scheme began in 2002, prosecutors say, when Taylor, Bean Whitaker executives moved to hide the firm’s losses, secretly overdrawing its accounts at Colonial Bank by more than $100 million. To cover up the actions, the lender sold Colonial some $1.5 billion in “worthless” and “fake” mortgages, prosecutors said at trial. The government, in turn, guaranteed those fraudulent home loans.
During the course of the fraud, prosecutors said, Mr. Farkas pocketed some $20 million, which he used to buy a private jet, five homes and a collection of vintage cars.
“His shockingly brazen scheme poured fuel on the fire of the financial crisis,” Mr. Breuer said.
With the credit crisis in full swing, Mr. Farkas and other Taylor, Bean Whitaker executives persuaded Colonial to apply for $570 million in federal bailout funds through the Troubled Asset Relief Program. The Treasury Department approved the rescue funds, on the condition that the bank was able to raise $300 million in private funds. The Taylor, Bean Whitaker executives falsely led Colonial into thinking that was possible. Ultimately, the government did not give any money to Colonial.
“Today’s verdict ensures that Farkas will pay for his crime — an unprecedented scheme to defraud regulators during the height of the financial crisis and to steal over $550 million from the American taxpayers through TARP,” Christy Romero, the acting special inspector general for the TARP program, said in a statement.
In August 2009, Colonial filed for bankruptcy, the same time that Taylor, Bean Whitaker failed.
Article source: http://feeds.nytimes.com/click.phdo?i=e575d25655491ac402c5823ed83caa70
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