TBW Taylor Bean Chairman Arrested On Fraud Charges

“The fraud here is truly stunning in its scale and complexity,” said Lanny A. Breuer, assistant attorney general in the criminal division of the Department of Justice. “These charges send a strong message to corporations and corporate executives alike that financial fraud will be found, and it will be prosecuted.”

Once they determined that that approach might be difficult to conceal, they started selling mortgage pools and other assets to Colonial Bank that they knew to be worthless, officials said. Mr. Farkas and his partners relied on this technique to sell more than $1 billion of fraudulent assets over the course of several years, even covering up the fraud by recycling old fake assets for new ones, according to the complaints.

Editor’s Note: TBW has been high on my list of incompetent fraudsters. I always thought it was a stupid risk to “sell” mortgages and “sell” the servicing rights (probably to their own entity), and then take the servicing back. Stupid maybe, but they had no choice. The entire Taylor Bean operation wreaks of fraud and inconsistencies.

Bottom Line: If you have a TBW as the originating “lender” this article indicates, as we have known all along, that they were using OPM (Other People’s Money) and they were NOT the lender even though they said they were. It is highly likely that few, if any, of the loans were actually “securitized” because the loans were either nonexistent as described, never accepted by any pool (even though there might be a pool out there that claims ownership) and that none of the assignments were ever completed.

Thus your claims against TBW (including appraisal fraud, predatory loan practices, deceptive loan practices, fraud etc.) are properly directed, to wit: TBW still owns the paper, although the obligation is subject to an equitable unsecured claim from investors who funded the loan.

June 16, 2010

Executive Charged in TARP Scheme

By ERIC DASH

Federal prosecutors on Wednesday accused the former chairman of Taylor, Bean & Whitaker, once one of the nation’s largest mortgage lenders, of masterminding a fraud scheme that cheated investors and the federal government out of billions of dollars and led to last year’s sudden failure of Colonial Bank.

The executive, Lee B. Farkas, was arrested late Tuesday in Ocala, Fla., after a federal grand jury in Virginia indicted him on 16 counts of conspiracy, bank fraud, wire fraud and securities fraud. Separately, the Securities and Exchange Commission brought civil fraud charges against Mr. Farkas in a lawsuit filed on Wednesday.

Prosecutors said the fraud would be one of the biggest and most complex to come out of the housing collapse and the government’s huge bailout of the banking industry. In essence, they described an elaborate shell game that involved covering up the lender’s losses by creating fake mortgages and passing them along to private investors and government agencies.

Federal officials became suspicious after Colonial BancGroup, the main source of financing for Mr. Farkas’s company, tried to obtain $553 million in bailout money from the Troubled Asset Relief Program. The TARP application, filed in early 2009, was contingent on the bank first raising $300 million from private investors.

According to the S.E.C. complaint, Mr. Farkas and his partners said they would contribute $150 million, two private equity firms would each contribute $50 million, and a “friends and family” investor group would contribute another $50 million. “In truth, neither of the $50 million investors were private equity investors and neither ever agreed to participate,” the complaint said.

Mr. Farkas pocketed at least $20 million from the fraud, which he used to finance a private jet and a lavish lifestyle that included five homes and a collection of vintage cars, prosecutors said.

But the case is likely to expand beyond Mr. Farkas. The complaints cite the involvement of an unnamed Colonial Bank executive and other co-conspirators in the suspected fraud, and prosecutors said they might hold others accountable down the road.

“The fraud here is truly stunning in its scale and complexity,” said Lanny A. Breuer, assistant attorney general in the criminal division of the Department of Justice. “These charges send a strong message to corporations and corporate executives alike that financial fraud will be found, and it will be prosecuted.”

Officials said the many layers of the scheme resulted in more than $1.9 billion of losses to investors; a $3 billion loss to the Department of Housing and Urban Development, which guaranteed many of the loans that Mr. Farkas’s company sold; and a $3.6 billion hit to the Federal Deposit Insurance Corporation, which had to take over Colonial Bank and pay its depositors after many of the bank’s assets were found to be worthless.

The complaints also list BNP Paribas and Deutsche Bank, which provided financing to Mr. Farkas’s company, as victims of the suspected fraud. Together, they lost $1.5 billion.

According to the complaints, the fraud started as early as 2002 with an effort to conceal rising operating losses at Taylor, Bean & Whitaker, a mortgage lender founded by Mr. Farkas. The first stage involved an attempt to hide overdrafts on a credit line the company had with Colonial Bank. As those overdrafts grew, prosecutors contend, Mr. Farkas and his associates started selling fake mortgage assets to Colonial Bank in exchange for tens of millions of dollars.

Once they determined that that approach might be difficult to conceal, they started selling mortgage pools and other assets to Colonial Bank that they knew to be worthless, officials said. Mr. Farkas and his partners relied on this technique to sell more than $1 billion of fraudulent assets over the course of several years, even covering up the fraud by recycling old fake assets for new ones, according to the complaints.

The transactions were “designed to give the false appearance that the loans were being sold into the secondary mortgage market,” Mr. Breuer said. “In fact, they were not.”

By 2008, prosecutors contend, the scheme had entangled the federal government. Investigators in the Office of the Special Inspector General for TARP took notice of the size of Colonial Bank’s bailout application and became suspicious of the accuracy of the bank’s statements.

That led investigators to alert other federal officials and draw a connection between Colonial Bank and Taylor, Bean & Whitaker, whose offices were raided by federal agents in August 2009. Both companies would soon stop operating.

“We knew it was a longstanding and close relationship between Colonial and T.B.W., and we decided that we needed to take a much closer look,” Neil M. Barofsky, the TARP special inspector general, said at a news conference on Wednesday. Investigators also discussed the situation with Treasury officials to “make sure the money would not go out the door.”

Federal officials have conducted nearly 80 criminal and civil investigations into companies that accepted TARP money, but so far they have filed charges in only one other case. In March, the head of Park Avenue Bank in Manhattan was accused of trying to defraud the government bailout program.

27 Responses

  1. The FDIC OWNS TBW NOTES BECAUSE THEY ARE BANKRUPT. THERE FOR THIRDPARTY TRANSFER RIGHTS DO NOT APPLY TO BIG BAD BANK OF AMERICA. THEY BROUGHT SUIT AGAINST FDIC TO GET THE NOTES BACK AND LOST!!!

  2. Usercarguy –

    Thanks for your comments. This forum is what keeps everyone going because we have all walked in the same shoes.

  3. Cheryl, bankruptcy gives you the tools to bring the claims against the lender. There is no shame in using the BK Court to get your case heard in front of a Federal Bankruptcy Trustee. I have chosen this as my “last resort”, upon the advice of an attorney. I don’t have any assets left either, after having the mortgage suck me dry for two years. The BK court will listen, especially if the mortgage itself is what brought on the situation you are in. Here’s to your health, and don’t give up!

  4. Mortgage Fraud Task Force Arrests 485 in Sweeping Crackdownby DIANA GOLOBAY
    •Fraud Cases Swell 63% as Agencies Step up Enforcement
    •Big mortgage fraud bust to be announced Thursday afternoon
    •Feds Charge More than 400 with Mortgage Fraud
    •$35 Million Foreclosure Assistance Scam Busted in Maryland
    •Straw Buyer Schemes Lead to $34 Million in Fraud Indictments
    Thursday, June 17th, 2010, 2:47 pm

    Since the launch of a national mortgage fraud enforcement campaign on March 1, federal efforts led to 485 arrests nationwide, making it the largest-ever collective enforcement initiative against mortgage fraud.

    The effort, dubbed “operation stolen dreams,” is headed up by US Attorney General Eric Holder, Federal Bureau of Investigation (FBI) director Robert Mueller III and Housing and Urban Development – Office of Inspector General (HUD-OIG) Kenneth Donohue.

    The mortgage fraud crack-down has uncovered 1,215 criminal defendants nationwide — including 485 arrests — who are allegedly responsible for more than $2.3bn in losses.

    To date, the operation resulted in 191 civil enforcement actions resulting in the recovery of more than $147m:

    “The last several years have seen enormous and damaging developments in the mortgage and housing markets, and the government has stepped in to bolster unstable marketplaces and devastated communities,” said HUD-OIG’s Donohue in a statement.

    “From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” said the FBI’s Mueller. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

    The types of alleged mortgage fraud cases uncovered and investigated include builder bailout schemes, where builders establish relationships with unlicensed mortgage brokers to “sell” homes to straw buyers at inflated prices. Fraudulent schemes also involved “ghost loans” where straw buyers misleadingly obtain loans on properties that have multiple unrecorded liens without the other lender’s knowledge.

    Reverse mortgage schemes often prey upon elderly homeowners by profiting on phantom equity. Other mortgage fraud cases involving loan modification sometimes lead to homeowners who think they are only refinancing to actually end up signing over their homes.

    As the breeds of mortgage fraud grow more exotic and damaging, federal investigations are also picking up.

    The number of mortgage fraud suspicious activity reports referred to law enforcement grew 5% during fiscal year 2009 to 67,190, according to the latest yearly mortgage fraud report from the FBI.

    Write to Diana Golobay.

  5. Anonymous –

    I am in default because 4 local branch BOA’s in Kansas City and Kansas denied my full payments. They set the computers up to deny any payment from me. BOA Bank Mgr. even called accounts and they said they were told not to accept payments from me. BOA corporate office sent me a letter stating if I wanted to pay my payments I could either go to Dallas or Getzville, NY.

    If I filed bankruptcy, I have nothing but my small house. I have no credit cards and have an old car.

    Hopefully Neil’s reports will help me. I will keep fighting as long as my health holds out. Thanks for your comments.

  6. Cheryl

    Just a thought – because I am not an attorney – but anything that can help keep your case alive is important. Bankruptcy does not have the stigma it once had. Everyone’s credit is already destroyed – and even if one has good credit, it is very difficult, today, to get a loan or refinance.

    Have seen courts toss out quiet title actions if the borrower is in default. But, you say you are still paying right? – so in your case, it would be different.

  7. I was told a foreclosure in Florida must remain dormant for five years for Quiet title to be granted. Mines pushing the three year mark. I’m really just waiting for the proper entity to show itself. If HSBC makes a move, I’ll get a lawyer!

  8. Here’s the link to the SEC Complaint against Farkas.

    It’s a pdf file

    http://www.sec.gov/litigation/complaints/2010/comp-pr2010-102.pdf

  9. To Anonymous –

    Thanks. Lawyer does not get it and BOA has filed a motion to dismiss right before the court date. My lawyer made an error. I am so angry. I do not want to file bankruptcy. I have been thinking about filing for a Quiet Title, but it would be quite a battle and I have been going for 3 years already. Do you know why more borrowers are not filing for quiet title? April Charney in FL filed a few. I ordered one of Neil’s documents. Thanks for your comments.

  10. Cheryl

    They can repurchase anything they deem non-compliant – and it does not have to be only for delinquency. It could mean for just about any reason – including missing documents, breach of representation, non-compliance with law, etc. etc. And, they can sell loans at any time.

    Fight hard and tough. And keep contacting government agencies. Government agencies are only now coming to realize the massive mess. The more of us that contact them – the better.

  11. To Ian –

    I found the HAMP program listed on my BOA’s loan history records. I called Treasury Dept. and they told me they cannot give any information. They said call Fannie Mae. You have to know I have been on this road with BOA and Fannie Mae for 3 years. Fannie Fraud Dept. will not talk to borrowers but they talked to me because at the time their regulator was OFHEO and I harrased them enough they had the FM fraud dept. call me. Fannie Mae told me they wanted no involvement in a lawsuit with BOA and me and 1 month later BOA reported me to Fannie as being in bankruptcy and foreclosure (which I found on my loan history records and BOA had to repurchase my loan. FM cannot have a repurchase if the loan is performing and my loan was. Now Fannie Mae tells me I never had a loan with them even though I had recorded Rider and Addendum to Note.

    I did not sign anything to be put in the HAMP program. Treasure Dept. wiould not help me and Fannie Mae will not talk to me.

  12. To Cheryl- when you say that BOA had you enrolled in the HAMP program illegally, what exactly did you mean? Did you sign anything? Did you report the fraud to fnma or Treasury? Please provide any contact info. Thanks.

  13. Deb,

    I wish there was something I could do for you. My heart is broken for you and for the rest of us going through this. Unless there are some ground moving decisions out of California soon, my house will probably be stolen too.

    Let’s pray that others after you will win their cases and that your foreclosure will be reversed as a result.

    *****

    I had always been content with my lot in life. I never longed for money or riches. It isn’t until now that I realize what a handicap it is to be of limited resources. We all need attorneys and forensic accountants but they are beyond the reach of most of us going through this.

    You guys want to hear something funny? LOL LOL LOL I had a dream that Oprah Winfrey came to our home and offered to buy us a bigger and more beautiful home for a lot less than what we currently owe. Her solution to the foreclosure crisis was to use her wealth to buy people homes for way less. Hahahahaha. I did not want to wake up from that one! I wish I could dream it again. It was a nice escape from reality, I tell ya.

  14. Lisamarie:

    I agree 100%. Bank of America runs America. I have a 2-year lawsuit coming to an end within 1 month and after my deposition with them, they are so nervous because of all the fraud in the loan they are pulling out all the stops. I do not think they will find this loan because I had 5 different similar addresses on everything including DOT and Note.

    BOA illegally has me listed in the Fannie Mae Hamp Program and Treasury Dept. Geitner and BOA has received money for me being in a loan for 3 months. and I am not even in it. I found out on my loan history pages.

    I am transferred to BAC Home Loans (Countrywide) who is a debt collector.

  15. neil
    i apologize if my earlier post was offensive , my frustration when i read the article got the better of me,
    .

  16. My heart is breaking my home is stolen and all I believed in is a lie. Do the population understand what all this really means today I’d probably the safest day if my life : reality

  17. Why the hell doesn’t the feds pounce on the investment banks for the very same reasons? Seems the investment banks were selling and reselling fraudulent securities just like TBW was.

  18. Whatever we do – however we approach to challenge in court – unless the banks are willing to grant principal reduction – it will be a very tough battle. And, that is even if you have everything on your side.

    No principal reduction is the consensus of the banks – and the government supports. How people are being held responsible for inflated loan on inflated appraisals – all procured by fraud – is beyond comprehension.

    Unless the government does something to restore victims to whole – by enforcing principal reductions – we will continue to be victims of courts and judges who simply do not get it. This is because Congress is telling them it is okay to – foreclose upon America.

    This is the way it is.

  19. Oh posted befor I’d got done…. Missed the bit where only by transfer from trustee at closing who happened to belong to the lender company and the bulder / developer entity being situated right next door office to indymac whom were purportedly sold to 3 months later who were servicers but who now as one west forclosed and sold at a public auction to their partner in crime HSBC FOR CASH. ( I’m still not sure where the purported investor wells Fargo is in all of this but I checked DALT 2007 AR3 ) Were those our tax paying dollar cash by the way and this was recorded by fidelity national title insurance fir trustee Corp the foreclosing trustee whom were successor trustee to the builder owned title company for the conduit lender who used somebodies money who is still a mystery. Phew is there any winder it’s confusing I’m in medcine ! Thanx and much respect to you all

  20. Can anyone shed light here’s the story. Indymac. Please staywith me…. Sevucer with wells ffargo master servicer of securitization trust ect who are also the purported “investor” who apparently have no contact info and I am told not to contact them and then we have one west ( private investors ex Goldman sacs) who are succesor and ” overseen” by the FDIC as they were receivers who sold to one west. That is servicing rights this was in the middle if the forclosure and I ran for protection of the bankruptcy court whilst I figure out my next move resulted in lawsuit A tort claim. I served summons and one west decide their best policy is not to defend and to simply continue with the busiess plan and foreclose and steal my home regardless of legal cause using attorney infact for trusteecorp foreclosure mill and so may later plead as Neil puts plausible deniability. Well after this post well see be ause with or without my home imgoing after these bastards that ruined me and trashed my life like it’s of no importance and did so to a whole nation it affects everyone and it’s everyones business. I’ll keep fighting. Anyhoo befor I got on the soap box, if those entities are all part of dalt 2007 AR3and it appears atfirst glance they are selling “for cash” now as opposed to ” for value” by the way, then isn’t that insider trading and the very existence of the instrument was funded by the investors who clearly do not approove! If any one can put me straight I welcome the critique ism trying to make sense of this mess as the opposition reveal new ways of comitting fraud and perjury under oath

  21. I feel I should also include the meaning of the word “pettifogger:”

    PETTIFOGGER. A lawyer who is employed
    in a small or mean business, or who
    carries on a disreputable business by unprincipled
    or dishonorable means.
    “We think that the term ‘pettifogging shyster’
    needed no definition by witnesses before the jury.
    This combination of epithets, every lawyer and
    citizen knows, belongs to none but unscrupulous
    practitioners who disgrace their profession by
    doing mean work, and resort to sharp practice
    to do it.” Bailey v. Kalamazoo Pub. Co., 40
    Mich. 256.

  22. Actually, from Blacks 2nd, 1910, I offer the following:

    SHYSTER. A “pettifogging shyster” Is
    an unscrupulous practitioner who disgraces
    his profession by doing mean work, and resorts
    to sharp practice to do it. Bailey v.
    Kalamazoo Pub. Co., 40 Mich. 251. See, also,
    Gribble v. Pioneer Press Co., 34 Minn. 342,
    25 N. W. 710.

  23. That made me laugh. Your right,thanks. and I agree, I hope they take their buddies at HSBC with them!

  24. Lisamarie, I think it’s “shiester”, but I get the jist. I’d like to see some Wells Fargo execs doing the “perp walk”; I believe their time is coming.

  25. Bank of America runs America and they are the shistiest shisters in the universe.

  26. And this was any different than WAMU or the rest of them? None of them followed securitization rules, accounting rules or IRS rules. They all committed BK fraud, tax evasion and created fraudulent and unenforceable “fake” loans disguised as neg am option arms or no docs with no chance they could ever be repaid.

    Truly, what is the difference? Government pull?

    Indict them all and liquidate their companies, forgive the debt and use the tax liability from the homeowners to create government bonds payable over 15 years to restart the game with Glass Steagle reimplemented.

  27. IN THE MEAN TIME BANK OF AMERICA AND ALL THE REST ARE BECOMING BIGGER AND STRONGER.
    THANKS TO GEORGE BUSH, OBAMA & COMPANY

    GOD BLESS AMERICA

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