The United States Attorney’s Office for the Eastern District of Virginia actually took a mortgage fraudster bankster to trial, and won. As DDay reported this AM, Lee Bentley Farkas, the former chairman of a private mortgage lending company, Taylor, Bean & Whitaker was convicted after a 10 day trial, during which he took the stand to protest that his actions were perfectly legal.
The jury did not buy this story and convicted him.
So, what were these actions that he considered to be legal? Well first he engaged in a pattern of money laundering akin to check kiting or paper hanging and when done on a large corporate scale is called corporate kiting. It involves moving money around from account to account to hide the fact that you have a shortfall in funds. In Taylor Bean’s case, the kiting continued until the deficit reached $100 million. Thereupon the next fraud was born.
Taylor Bean sold the same mortgages twice.
Yes, all you judges out there with foreclosure cases in front of you, pay attention. When you get a homeowner telling you that there are not sure that the current foreclosing plaintiff is the correct party in interest, you better make damn sure there is a complete and unbroken chain of title between the origination of the mortgage and the foreclosing plaintiff, because we now have proof beyond a reasonable doubt that mortgages were indeed SOLD TWICE.
In this process, Taylor Bean also made false reports to the SEC. In all, Farkas was convicted of 14 counts including bank fraud, wire fraud and securities fraud. Other Taylor Bean executives have pled guilty. The collective frauds amounted to $2.9 billion and led to the collapse of both Taylor Bean and Colonial Bank, one of the 25 largest banks in the US. It also stole money out of TARP and sold worthless asset-backed securities to Deutsche Bank, BNP Paribas Bank and other financial institutions. More details here.
I would like to express my gratitude and admiration for the agents and accountants who slogged through all those boxes and boxes of documents to make this case. I know how daunting it is to walk into a room bursting with file cabinets and bankers boxes of documents and do that spinning straw into gold miracle that makes all these pieces of paper into an understandable set of admissible evidence. Been there, done that, still have nightmares about being buried alive under mountains of paper.
I would also like to give a big thank you to the line assistants who actually put this case together. The NY Times and the Washington Post, etc., are going to quote the bosses at Main Justice, but I know that you guys made this happen; sitting in some gritty evidence room with the agents and auditors and pacing back and forth in your offices trying to organize all that information into an easy to understand presentation. The Bear Sterns case showed just how difficult it is to make deliberately overcomplicated and overlapping transactions crystal clear.
So, a big FDL shout out to Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia for overcoming the “trust me it’s legal, just too complicated for non MOTU to understand” defense. That excuse worked so well in Congress, where the legislators have access to staff help to aide them in understanding these issues, that it makes it especially notable that you could overcome it with the ordinary lay jurors. Or maybe this, once again, proves the genius of the trial by jury system; jurors so often prove themselves so much smarter than the folks running the country.
And Firepups, maybe we should thank DOJ for getting this one right and encouraging them to repeat this experience until some serious accountability kicks in. Contact info is here.