By Kevin Chiu
Two former mortgage company executives have been sentenced to federal prison for their roles in a fraud scheme involving more than $2.9 billion that contributed to the failures of their company and Colonial Bank.
Desiree Brown, the former treasurer of Taylor, Bean and Whitaker was sentenced to six years in prison for her part in the scheme. Raymond Bowman, the mortgage company’s ex-president was sentenced to 30 months behind bars by U.S. District Judge Leonie Brinkema in the Eastern District of Virginia.
Both admitted to conspiring with Lee B. Farkas, the former chairman of TBW to fraudulently obtain funding for TBW in efforts to cover-up expenses related to operations and mortgage servicing payments owed to third-party purchasers of mortgage-backed securities while the bank was fighting to stay in business as a result of making millions of dollars in bad home mortgages.
Taylor, Bean and Whitaker was one of the largest privately-held mortgage companies in the U.S. until its failure in 2009.
“These TBW executives helped pull off one of the largest, longest-running bank fraud schemes in history that led to the collapse of Colonial Bank and TBW,” said U.S. Attorney Neil MacBride. “They knew that without their fraud scheme, TBW would fail. They helped Lee Farkas do what they knew was wrong, and now they will pay for their crimes.”
Bowman and Brown participated in a scheme from 2003 through August 2009, according to U.S. prosecutors. The fraud caused Colonial Bank and Colonial BancGroup to purchase tens of millions of dollars of worthless mortgage-backed securities, caused Colonial BancGroup to report false information on its financial statements, and artificially inflated the value of TBW’s mortgage servicing rights.
Brown, 45, of Hernando, Florida pled guilty in February to one count of conspiracy to commit bank, wire and securities fraud. Bowman, 45, of Braselton, Georgia also pled guilty in March to one count of conspiracy to commit bank, wire and securities fraud and one count of making false statements to federal agents in a deal they worked out with government prosecutors.
“Raymond Bowman and Desiree Brown used their positions as high-level executives at TBW to help Lee Farkas perpetrate a sprawling $2.9 billion fraud,” said U.S. Assistant Attorney General Breuer. “Their crimes contributed to the failure of Colonial Bank and the collapse of TBW, harming hundreds of shareholders, investors and employees.”
Farkas was convicted in April on 14 counts of fraud for his role in masterminding the scheme, which was one of the largest bank frauds to date in U.S. history. The group conspired to take funds out of bank checking accounts to keep the bank afloat ripping off bank customers’ accounts, according to federal prosecutors. Farkas is scheduled to be sentenced on June 27, 2011.
Paul Allen, the former chief executive officer of TBW, Catherine Kissick, a former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division, Teresa Kelly, a former operations supervisor for Colonial Bank and Sean Ragland, a former senior financial analyst at TBW, have also pleaded guilty for their participation in the scheme.