Thursday, June 17, 2010

Former Taylor Bean CEO Arrested For Fraud

The phrase "failed Florida mortgage lender" may no longer raise eyebrows, but the story of the multi-billion dollar alleged fraud at Taylor Bean & Whitaker Mortgage is a doozy. The WSJ reports that the FBI has just arrested Lee Farkas, the former chairman of Taylor Bean, and "charged him with orchestrating a seven-year, multibillion-dollar fraud that contributed to the collapse of a major bank and targeted the US government." According to the charges, Mr. Farkas and his schemes have cost investors and government programs in excess of $2 billion. The good news is that Taylor Bean was never granted the $550 million in TARP funds it was hoping to snare, so at least one government program was spared the embarrassment of being swindled by a shyster. Unfortunately, our savvy folks at the FHA were outwitted by Mr. Farkas and his alleged co-conspirators. The government agency claims that it alone lost $3 billion because Taylor Bean had lied about the health of loans it was servicing. Sounds more like Taylor Bean cost the government in excess of $3 billion? I'm not following the math here, but maybe somebody somewhere made a billion to offset the FHA's loss? It wasn't the FDIC, which was tasked with cleaning up the mess left in the wake of the collapse of Colonial Bank. Colonial, one of the largest bank failures of the recent credit crisis, purchased around $400 million in "fake assets" from Taylor Bean. Perhaps Mr. Farkas profited handsomely? The guy did own a gym, which was where the FBI chose to make the arrest. They were nice enough to wait for him to finish his workout. Also, Mr. Farkas had the prerequisite fancy car collection. No doubt there were several obnoxious houses too? Yep, five of them. Oh, and he liked corporate jets.

If found guilty of the charges filed against him, Mr. Farkas will face up to 435 years in prison and fines of at $13.8 million as well as a forfeiture of $22 million. Once again, I'm not quite getting the math. This is a multi-billion dollar scheme. Where did all the money go? How is it that he only has to give up $35.8 million? In any event, the prison sentence sounds about right.

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