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UPDATE 1-Ex-Taylor, Bean exec pleads guilty in fraud case
February 24, 2011 / 6:50 PM / in 7 years

UPDATE 1-Ex-Taylor, Bean exec pleads guilty in fraud case

* Former treasurer guilty for massive fraud conspiracy

* Brown to cooperate with prosecutors in other cases

* She could face up to 30 years in prison (Adds details from hearing)

By Jeremy Pelofsky

ALEXANDRIA, Va., Feb 24 (Reuters) - The former treasurer of bankrupt Taylor, Bean & Whitaker Mortgage Corp, Desiree Brown, pleaded guilty on Thursday to conspiracy for one of the biggest fraud cases so far stemming from the U.S. mortgage meltdown.

Brown, who eventually rose to become the treasurer from being a receptionist at the large, private mortgage firm, has agreed to cooperate with prosecutors as they pursue criminal charges against the former chairman of TBW, Lee Farkas.

She pleaded guilty to one count of conspiracy to commit bank, securities and wire fraud for almost six years until the firm collapsed in August 2009. The scheme included generating money for the firm through fake sales of mortgage loans.

Brown, 45, told the judge during her plea hearing that others beyond Farkas were involved in the scheme, but she did not identify them. She also settled charges by the Securities and Exchange Commission on Thursday.

Brown, who declined to comment after the hearing, faces up to 30 years in prison on the conspiracy count, but prosecutors could recommend that she receive a shorter sentence depending on her cooperation. She is due to be sentenced on June 10 and could also have to pay restitution.

TBW has said in bankruptcy court papers that Brown received more than $1.5 million in bonuses over three years, including more than $700,000 in cash bonuses, another $700,000 to buy a waterfront property and $50,000 for her child’s education.

Taylor, Bean & Whitaker filed for bankruptcy in August 2009 and prosecutors have estimated the fraud at the firm involves some $1.9 billion, and potentially billions of dollars more in losses to federal housing programs.

Farkas has pleaded not guilty to 16 counts of fraud and conspiracy charges. His trial is slated to begin on April 4.

Prosecutors have accused him and unnamed co-conspirators of orchestrating an eight-year scheme that also contributed to the collapse of Colonial Bank, a unit of the now-bankrupt Colonial BancGroup CBCDQ.PK, one of the 50 largest U.S. banks at the time.

Prosecutors have said that TBW received more than $400 million from Colonial Bank for assets that had no value and that the scheme also included the misappropriation of more than $1 billion from one of its own mortgage lending facilities.

Farkas is also accused of using money to fund a lavish lifestyle, including fancy cars and several homes.

TBW came under scrutiny after authorities became suspicious about a statement by Colonial Bank that it had raised $300 million in a bid to obtain more than $550 million from the federal bank bailout project -- the Troubled Asset Relief Program.

No TARP funds were distributed to Colonial Bank or TBW. (Reporting by Jeremy Pelofsky, editing by Dave Zimmerman and Matthew Lewis)

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