* Kissick gets longest sentence so far in TBW probe
* An assistant sentenced to 3 months in prison
(previously WASHINGTON, adds comments, details of informant)
By Jeremy Pelofsky
ALEXANDRIA, Va., June 17 A former bank
executive who served as the go-between during a seven-year,
$2.9 billion fraud scheme at Taylor, Bean & Whitaker Mortgage
Corp was sentenced on Friday to eight years in federal prison.
Catherine Kissick, 50, who headed Colonial Bank's mortgage
warehouse lending division, pleaded guilty in March to one
count of conspiracy to commit bank, securities and wire fraud.
She also testified against TBW former chairman Lee Farkas.
She received the longest prison sentence so far related to
the TBW investigation, though Farkas, who was convicted on 14
counts for the fraud at the mortgage firm he built, is due to
be sentenced on June 27.
"Lee Farkas pulled off one of history's largest bank frauds
because he had people inside Colonial Bank with the power to do
it and hide it," said U.S. Attorney Neil MacBride. "Without
help from Catherine Kissick ... the fraud scheme might have
been discovered in its infancy."
During a tearful court hearing, Kissick told District Judge
Leonie Brinkema that her "intent was never to hurt the bank"
and that she was "very scared and didn't know what to do."
Federal prosecutors had sought 11 years of prison for her,
saying she was "in the number one position to stop the fraud."
But they acknowledged that Farkas had manipulated her and said
other undisclosed family issues would result in a shorter
Brinkema said the sentence was necessary as a deterrent,
especially given Kissick's senior position at the bank.
Kissick was the primary contact point for Farkas and helped
devise plans that enabled TBW to sell loans that did not exist
or had already been sold to other banks or investors.
Colonial Bank ended up advancing money to TBW for the
loans. They came up with the scheme to help address constant
overdrafts by TBW which resulted from massive losses by the
firm, according to prosecutors.
Brinkema also sentenced one of Kissick's assistants, Teresa
Kelly, who worked as an operations supervisor and processed
many of the transactions of fake mortgage sales, to three
months in prison followed by nine months of house arrest.
Kelly's lawyer said that when the assistant was first
approached by the FBI in July 2009 before the bank and TBW
collapsed, Kelly agreed to serve as an informant, including
having a microphone sewn into her clothing to record
Colonial Bank, a unit of Colonial BancGroup Inc CBCDQ.PK
was one of the largest U.S. banks before it collapsed. The bank
and the mortgage company TBW filed for bankruptcy in August
2009, after which authorities began to uncover the fraud.
As losses mounted at TBW, it tried to drum up capital to
help Colonial Bank win $553 million in funding from the federal
bank bailout program known as the Troubled Asset Relief
Program, prosecutors said. No money was disbursed.
The TBW investigation represents a big victory for the
Obama administration which has been under pressure to prosecute
senior executives who were responsible for the U.S. housing
market collapse, which touched off a deep recession.
Last week, two of Farkas' key lieutenants received prison
sentences. Former TBW treasurer Desiree Brown was sentenced to
six years in prison and former TBW president Raymond Bowman got
The cases are USA v. Kissick, No. 11-cr-88, and USA v.
Kelly, No. 11-cr-119 in U.S. District Court for the Eastern
District of Virginia.
(Editing by Dave Zimmerman and Derek Caney)