ALEXANDRIA, Virginia (Reuters) - Taylor, Bean & Whitaker Mortgage Corp’s former chairman, convicted of masterminding a $2.9 billion fraud scheme before the company collapsed, was sentenced on Thursday to 30 years in prison.
Lee Farkas, 58, was convicted in April on 14 counts of conspiracy, bank, securities and wire fraud that brought down one of the largest private mortgage firms in 2009 as well as contributed to the implosion of one of the top U.S. banks, Colonial BancGroup Inc’s Colonial Bank.
He was the last to be sentenced in the fraud case, which represents a victory for the Obama administration because it has been criticized for prosecuting few senior executives over the housing market collapse and subsequent financial crisis.
Farkas was convicted for a scheme that ran from 2002 until 2009 in which he and others hid massive losses by shuffling money between Colonial Bank accounts, as well as by selling mortgages that either didn’t exist, had already been sold or worthless.
Before being sentenced, Farkas read a brief statement in which he said he “strived to be a good person” and that he believed the employees of the mortgage firm and the bank were “acting together in good faith” rather than greed.
While he said he was remorseful, Judge Leonie Brinkema said that she did not detect any remorse in his statement -- rather “you regret getting caught.” She imposed the 30-year sentence and also ordered him to forfeit more than $38.5 million.
“This was a very serious series of crimes,” Brinkema said.
Farkas and other executives at the mortgage company were also accused of misappropriating money from one of its multi-billion dollar funding mechanisms that had two big investors, Deutsche Bank AG and BNP Paribas SA.
After the 90-minute hearing, Justice Department officials called Farkas’ statement refusing to take the blame for masterminding the scheme “truly astounding.”
“Lee Farkas perpetrated an absolutely staggering fraud,” Lanny Breuer, assistant attorney general for the Justice Department’s criminal division, told reporters afterward. “This was a man who lived the life of a prince.”
Prosecutors sought an order that Farkas be required to forfeit at least 11 properties in Florida and Maine as well as 11 luxury and antique vehicles, including a 1929 Ford Model A Woody and a 1965 Shelby Cobra.
Prosecutors had sought at least 50 years in prison so that Farkas would be sure to spend the rest of his life there and serve as a deterrent. Farkas’ lawyer had requested that the sentence be limited to no more than 15 years.
“I think 30 years is a very powerful deterrent message,” Breuer said, adding that anyone who didn’t think so was “brain dead.”
Before the sentencing, Farkas’ lawyer Bruce Rogow tried to lay much of the blame on Colonial Bank, which was struggling on its own, and said those involved in the fraud scheme were “delusional” because they thought “it will all work out.”
During much of the hearing Farkas, thinner than when he was first arrested a year ago, sat silently in a green prison jumpsuit looking straight ahead with his hands clasped together, occasionally rocking back and forth in his chair.
Farkas had also attempted to help Colonial Bank obtain a $553 million loan from the federal bank bailout program, but the money was never disbursed. The bank was shut down by regulators and most of its assets were sold to BB&T Corp.
Colonial Bank’s collapse was the sixth-largest bank failure and the third largest during the financial crisis which began in 2007. Hundreds of workers lost their jobs from the collapse of both firms.
Half a dozen other executives from Taylor, Bean & Whitaker and Colonial Bank pleaded guilty after cooperating with investigators. Prosecutors have said that the investigation into Taylor, Bean and Colonial Bank was continuing.
Farkas’ main contact at the bank, Catherine Kissick, was sentenced to eight years in prison while the former chief executive at Taylor, Bean, Paul Allen, was sentenced to 40 months. The shortest sentence handed out was three months in prison.
Editing by Lisa Von Ahn and Gerald E. McCormick