Speech by SEC Staff:
Remarks at Joint News Conference
Lorin L. Reisner
Deputy Director, Division of Enforcement
U.S. Securities and Exchange Commission
U.S. Department of Justice, Washington, D.C.
June 16, 2010
The SEC today charged Lee B. Farkas, the former chairman and majority owner of Taylor, Bean & Whitaker Mortgage Corporation, with securities fraud and other violations of the federal securities laws.
Our complaint alleges that, as the country's mortgage markets began to falter, Farkas arranged the sale of more than one billion dollars worth of fictitious and impaired mortgage loans and securities from TBW to Colonial Bank, and caused these loans and securities to be reported falsely to the investing public as high-quality, liquid assets.
Our complaint also alleges that Mr. Farkas tried to defraud U.S. taxpayers and the TARP program through false representations about a non-existent $300 million capital commitment.
We allege that from 2002 through 2009, Farkas engaged in a fraudulent scheme to sell more than $1.5 billion of fake residential mortgage loans and severely impaired residential mortgage loans and securities from his company, TBW, to Colonial Bank, and for Colonial Bank's publicly traded parent company, The Colonial BancGroup, to falsely record these loans and securities as high quality assets in its filings with the SEC.
In addition, beginning in February 2009, Farkas is alleged to have represented directly to Colonial BancGroup and to the investing public through a series of false press releases that TBW had secured a $300 million equity investment in Colonial BancGroup that would allow Colonial Bank to qualify for approximately $550 million in TARP funds.
Our complaint alleges that the purported equity investment was, in fact, nothing more than a sham orchestrated by Farkas.
In addition to financial penalties, we are seeking a court order to hold Farkas accountable and deprive him of the profits from his fraudulent conduct.
The SEC's case was investigated by Bill Hicks, Graham Loomis, Aaron Lipson, Yolanda Ross and Barry Lakas of our Atlanta Regional Office.
The Commission also would like to acknowledge the assistance of the Fraud Section of DOJ's Criminal Division, The Special Inspector General for the TARP (SIGTARP), the FBI, the FDIC's OIG, and the OIG for HUD. The SEC is pleased to have brought this action in coordination with these other members of the Financial Fraud Enforcement Task Force.