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Jury convicts exec in $3B mortgage fraud case

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  • Jury convicts exec in $3B mortgage fraud case

    It causes shivers of all the things I think one can do not to get caught:

    Criminals are only getting caught when the system collapses.

    What about the ones that are less greedy, and went into it from the beginning with an exit plan?

    *******
    Read more: http://www.sfgate.com/cgi-bin/articl...#ixzz1K0oUuB9d

    (04-19) 15:29 PDT Alexandria, Va. (AP) --

    A jury on Tuesday convicted the majority owner of what had been one of the nation's largest mortgage companies on all 14 counts in a $3 billion fraud trial that officials have said is one of the most significant prosecutions to arise from the nation's financial crisis.

    Prosecutors said Lee Farkas led a fraud scheme of staggering proportions as chairman of Florida-based Taylor Bean & Whitaker. The fraud not only caused the company's 2009 collapse and the loss of jobs for its 2,000 workers, but also contributed to the collapse of Alabama-based Colonial Bank, the sixth-largest bank failure in U.S. history.

    The jury returned its verdict late Tuesday after more than a day of deliberations.

    Colonial and two other major banks — Deutsche Bank and BNP Paribas — were cheated out of nearly $3 billion, prosecutors estimated. Farkas and his cohorts — six of whom entered guilty pleas to related charges and testified against him at the two-week trial in U.S. District Court — also tried to fraudulently obtain more than $500 million 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 $550 million, ultimately neither Taylor Bean nor Colonial received any TARP money, and investigators from that office, along with the FBI and other agencies, helped uncover the fraud.

    Farkas testified in his own defense at the trial and claimed he did nothing wrong. He claimed he was unfamiliar with details or knowledge of many aspects of the various fraud schemes.

    In closing arguments, Farkas' lawyer Bruce Rogow, said the six executives at Colonial and Taylor Bean who struck plea deals skewed their testimony to bolster the government's case in the hope of receiving lighter prison sentences for their cooperation. Rogow said Farkas and everyone else at Taylor Bean was working honestly and ethically to get control of its finances and perhaps could have done the job if the government hadn't essentially shut the company down when it raided company headquarters in 2009.

    But prosecutors said the evidence against Farkas was overwhelming. They said the fraud began in 2002, when Taylor Bean overdrew its main account with Colonial by several million dollars. Midlevel executives at Colonial agreed to transfer money into Taylor Bean's accounts at the end of each day to avoid generating overdraft notices, a process known as "sweeping."

    As the hole grew to well over $100 million, Taylor Bean and a handful of Colonial executives concocted a scheme in which Taylor Bean sold hundreds of millions in worthless mortgages to Colonial — mortgages that had already been sold to other investors. More than $1 billion in such phony mortgages were eventually sold to Colonial, which listed them on its books and on its quarterly reports as legitimate assets, prosecutors alleged.

    In a related scheme, Taylor Bean created a subsidiary called Ocala Funding that sold commercial paper — essentially glorified IOUs — to banks including Deutsche Bank and BNP Paribas. But prosecutors said the collateral that supposedly backed that commercial paper was worthless, and when Taylor Bean collapsed in 2009, the two banks lost roughly $1.5 billion.



    Read more: http://www.sfgate.com/cgi-bin/articl...#ixzz1K0oPgaeR
    _____________
    "Corruptisima republica plurimae leges."

    "The more corrupt the state, the more numerous the laws."
    - Cornelius Tacitus

  • #2
    I'm glad to see them punished. I'd also like to see the idiots who purchased ocean front property in AZ to be banned from the banking industry. A simple title search would have shown the property to be owned by a different bank.. Correct?
    Any views or opinions presented by this prenomen are solely those of a burlesque author and do not necessarily represent those of a LEA or caementum couturier.

    nom de plume

    This is the internet- take all information with a grain of salt. Such could be valid and true or could be typed just for playing devils advocate.

    Comment


    • #3
      Originally posted by ryker View Post
      A simple title search would have shown the property to be owned by a different bank.. Correct?
      Perhaps, but how do you search that for 10,000 loans all at once. That's what happened there. One bank borrowed money from another bank and used their loan portfolio as collateral. It also doesn’t show if the loans were promised as collateral for a loan from someone else. Researching will only show who owns it now.

      It's not expected one bank would lie to another to get a loan.

      I got to watch this crap happen first hand at work before I quit and did my police academy.

      It wasn’t on purpose, but my group administered a securitized portfolio of loans. These loans were promised as collateral for the investment fund we administered. We were part of a big bank (which no longer exists by the way) and there were other areas of the bank also administering different securitized investments.

      So we were all kind of pulling our loans from the same cookie jar. However, it’s really all just data in computer systems, and quite often some of our loans would “disappear” from our portfolio and end up in someone else’s portfolio. So we would have to go back and research where it went, and units were fighting over who had what loans.

      Ahhhhhh…….. If the world only knew……..
      _____________
      "Corruptisima republica plurimae leges."

      "The more corrupt the state, the more numerous the laws."
      - Cornelius Tacitus

      Comment


      • #4
        But it was the Mortgage Brokers who caused all of this
        MDRDEP:

        There are no stupid questions, but there sure are a lot of inquisitive idiots.

        Comment


        • #5
          Originally posted by jcioccke View Post
          But it was the Mortgage Brokers who caused all of this
          They arn't brokers in the sense of the people you might deal with when you buy a home. They actually owned the loans. So they were mortgage BANKERS. A broker wouldn't have been able to mess something up this big. Brokers are just that, brokers. They get a fee for services. They don't own the loans. The Banks do.

          Don't get me wrong, brokers cause problems too. They are the paper pushers and a big part of either stopping or causing fraudulent numbers that get on loan applications that in the end become loans the banks get stuck with.

          So in this case, you could get a double whammy.
          1) The loans are garbage (worthless as collateral).
          2) The loans are used for collateral for more than one loan.
          _____________
          "Corruptisima republica plurimae leges."

          "The more corrupt the state, the more numerous the laws."
          - Cornelius Tacitus

          Comment


          • #6
            I'm sorry I was being sarcastic. I was a VP with a National Bank that dealt with Mortgage Bankers and Brokers for either corresponding (warehouse lines) or wholesale through the broker channel. We would end up bundeling and selling to Wall Street depending on the loan, credit risk etc. We never dealt in some of these loans that were made available.

            This company mentioned was the king of offering School Teachers Non Verified Income & Asset loans on a Neg Am 1.99 % interest rate. They were making 5-6 points on a loan of 400-750 thousand. I could go on with some of this shi- I saw.

            I laugh how when all said and done they blamed mortgage brokers, mortgage bankers and the realtors for this issue. It was banks and lenders like this offering the products (loans) for people that didn't qualify. Rant done.

            My bank bought many of these A+ rated loans (Thanks barney Frank) and we went belly up. Guess who lost his job with 200+ others????
            Last edited by jcioccke; 04-21-2011, 05:44 AM.
            MDRDEP:

            There are no stupid questions, but there sure are a lot of inquisitive idiots.

            Comment

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