Mortgage Executive Sentenced To 30 Years For $3 Billion Fraud

06/30/2011 05:39 pm ET | Updated Aug 30, 2011

ALEXANDRIA, Va. — An executive convicted of orchestrating a nearly $3 billion fraud as chairman of one of America's largest private mortgage companies was sentenced Thursday to 30 years in prison by a judge who accused him of showing no remorse.

Federal authorities say the case against Lee B. Farkas, former chairman of Florida-based Taylor Bean & Whitaker, is one of the largest prosecutions arising from the nation's financial crisis. The fraud put thousands of employees out of work and contributed to the collapse of Colonial Bank, which authorities described as the sixth-largest bank collapse in U.S. history.

"He deserves to be punished severely in light of the enormity of his crimes. The losses from this case are, in fact, off the charts," federal prosecutor Patrick Stokes said in urging a judge to send Farkas, 58, to prison for the rest of his life. "He has destroyed lives and institutions."

Farkas, who denied any wrongdoing when he testified at his trial, was convicted in April of all 14 counts, including securities fraud and conspiracy. On Thursday, he acknowledged taking risks and making errors in judgment to keep his company afloat. But did not directly apologize for any fraud.

"When faced with the prospect of Taylor Bean & Whitaker sinking, I had to take risks," said Farkas, who was taken into custody following the verdict and appeared in court Thursday in a green prison jumpsuit. "I let Taylor Bean & Whitaker get out of control by letting it grow too fast."

U.S. District Judge Leonie Brinkema told Farkas she detected no remorse as she sentenced him to 30 years – twice the 15-year sentence requested by his attorneys.

The fraud began in 2002 and took multiple forms until Taylor Bean collapsed in 2009 and the scheme unraveled, prosecutors said. Taylor Bean overdrew its main account with Alabama-based Colonial Bank by several million dollars and eventually double- and triple-pledged mortgages it held to a variety of investors. Prosecutors also alleged that Taylor Bean sold hundreds of million in worthless mortgages to Colonial.

They say Farkas was motivated by a lavish lifestyle, maintaining several dozen classic cars, a private jet and seaplane and multiple houses, including one in Key West.

Farkas, of Ocala, Fla., is the last of seven employees and executives from Taylor Bean and from Colonial to be sentenced. The other six cooperated with the government and agreed to testify against him in to secure lighter sentences for themselves.

Prosecutors say Colonial and two other major banks – Deutsche Bank and BNP Paribas – were collectively cheated out of nearly $3 billion in a scheme that spanned more than seven years. They say Farkas and his co-defendants also tried to fraudulently obtain more than $500 million in taxpayer-funded relief from the government's bank bailout program, the Troubled Asset Relief Program, also called TARP. Neither Taylor Bean nor Colonial ever received any TARP money, even though TARP at one point gave conditional approval to a payment of roughly $550 million, investigators say.

Farkas' lawyer. Bruce Rogow, said prosecutors had magnified Farkas' role in the fraud and said that while his client may have made naive or foolish business decisions, he was not a calculating criminal deserving of a life sentence. He said each of Farkas' co-defendants deserved blame for allowing the fraud to continue for years.

"He is not the ogre that the government makes him out" to be, Rogow said,

Neal MacBride, the United States attorney for the Eastern District of Virginia, said he found Farkas' apparent lack of remorse astounding, comparing him to a child who murders his parents and then begs for mercy because he's an orphan.

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