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Jury hears closings in massive fraud case
Six guilty pleas in $3 billion scheme
ALEXANDRIA, Va. | Prosecutors told a jury Monday that the owner of what was once one of the nation’s largest private mortgage companies ran a massive fraud scheme, dismissing the defendant’s assertion that he was unaware of the crimes that occurred around him.
A federal jury heard closing arguments in the case against Lee B. Farkas, the former chairman and majority owner of Ocala, Fla.-based Taylor Bean and Whitaker. Prosecutors said Mr. Farkas was the ringleader of a scheme that has already resulted in six guilty pleas to a fraud that totaled nearly $3 billion.
Taylor Bean collapsed in 2009, causing its more than 2,000 employees to lose their jobs. Taylor Bean’s primary banker, Alabama-based Colonial Bank, also collapsed in 2009 — the sixth-largest bank collapse in U.S. history.
Federal officials have said the case against Mr. Farkas is the most significant to develop out of the nation’s financial crisis.
Mr. Farkas‘ lawyer, Bruce Rogow, told jurors that the six executives at Taylor Bean and Colonial who struck plea deals and testified against the defendant skewed their testimony in hopes of receiving lighter prison sentences.
Mr. Farkas testified in his own defense Friday, telling the jury he believed he did nothing wrong as Taylor Bean waged a long-running campaign to get its finances in order. He testified that he was unaware and uninvolved in details of some of the largest, most significant aspects of the alleged fraud.
According to prosecutors, 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, prosecutors say. 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 charged.
The jury began deliberations Monday afternoon on 13 counts of bank fraud, wire fraud and securities fraud, and an additional conspiracy county. Mr. Farkas, 58, could face up to life in prison.
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