Feds to announce major mortgage fraud case
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Unleashing a major mortgage fraud prosecution, federal officials in Virginia will announce at least one indictment Wednesday stemming from their investigation of collapsed Colonial Bank and of Taylor, Bean & Whitaker Mortgage Corp., according to people briefed on the case.
Taylor, Bean, a major provider of home loans in the Southeast, is alleged in an indictment returned Tuesday to have engaged in a $2-billion fraud that contributed to Colonial’s failure.
Its chairman, Lee Farkas, 57, was arrested Tuesday night and charged with securities fraud, according to a report from Florida, where the company is based. Attorneys for Farkas could not be immediately reached.
[Update at 1:15 p.m. PDT: The case was filed Wednesday, as expected. Go here for the details.]
The failure of Alabama-based Colonial in August was one of the most spectacular collapses stemming from the mortgage meltdown. Colonial, the remains of which were acquired by BB&T Corp., had $25 billion in assets and $20 billion in deposits when it was seized.
The big guns attending the news conference in Alexandria, Va., include Assistant Atty. Gen. Lanny A. Breuer and Neil Barofsky, the special inspector general for the Treasury Department’s Troubled Asset Relief Program, better known as the government’s bank bailout program.
Barofsky’s office, the Housing and Urban Development inspector general and the FBI were among the agencies involved in investigating the case. In August, they searched Colonial offices in Orlando, Fla., and the Taylor, Bean headquarters in Ocala, Fla.
Two knowledgeable officials in Washington, who were not authorized to speak publicly before the news conference, confirmed that Wednesday’s announcement stemmed from that case. One part of the alleged fraud targeted Colonial’s warehouse lending arm, which provided lines of credit to mortgage bankers, enabling them to fund loans.
The Securities and Exchange Commission was expected to announce a parallel civil suit alleging that investors in both companies were defrauded.
-- E. Scott Reckard
