Trials & Litigation

Finally, a Big Fish: Federal Jury Convicts Taylor Bean Mortgage Co. Owner Farkas in $3B Fraud

In a rare major fraud case brought in connection with the nation’s financial crisis, the government has won a conviction.

A federal jury in Alexandria, Va., today convicted Lee Farkas, the chairman and majority owner of a major Florida-based mortgage company, on all 14 counts concerning a fraud scheme that cost three banks a total of $3 billion and led to the collapse of one, reports the Associated Press.

Farkas testified in his own defense, contending that he did nothing wrong and was unfamiliar with the details of the transactions at issue, which involved schemes to sell worthless Taylor Bean & Whitaker mortgages and commercial paper to the banks.

Convicted of conspiracy and bank, securities and wire fraud concerning his alleged masterminding of the schemes, he could be sentenced to a prison term of up to 30 years, according to Bloomberg.

Reuters also has a story about the conviction and an earlier post on the Bankruptcy Beat blog of the Wall Street Journal provides additional details about how the fraud was pulled off.

Although the AP article says the banks suffered some $3 billion in losses, other articles estimate the losses at a minimum of $1.9 billion and perhaps billions more.

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