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 federal prison.
The case against Lee B. Farkas, the 58-year-old former chairman of Florida-based Taylor Bean & Whitaker, is one of the most significant prosecutions arising from the nation's financial crisis. The fraud spanned more than seven years, put thousands of employees out of work and contributed to the collapse of Colonial Bank, which authorities call the sixth-largest bank failure in U.S. history.
"He deserves to be punished severely in light of the enormity of his crimes," federal prosecutor Patrick Stokes told U.S. District Judge Leonie Brinkema in recommending the defendant receive life in prison. "The losses from this case are, in fact, off the charts."
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 he 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 has been in custody since the verdict two months ago. "I let Taylor Bean & Whitaker get out of control by letting it grow too fast."
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. Federal agents raided 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 millions of dollars in worthless mortgages to Colonial — mortgages that had already been sold to other investors.
The green prison jumpsuit Farkas wore to court Thursday was a far cry from a lavish lifestyle he once enjoyed of classic cars, a private jet and sea plane and an impressive East Coast real estate collection — including a home 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 cohorts 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. Ultimately, 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 naïve 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.
Neil MacBride, the United States attorney for the Eastern District of Virginia, said after the sentencing hearing that he found Farkas's apparent lack of remorse "astounding."