A federal grand jury in Virginia has accused the CEO of Taylor, Bean & Whitaker Mortgage Corp. of Ocala, Fla., once one of the nation’s largest non-bank mortgage lenders, of using repo to run a $1.9 billion fraud scheme.
Criminal charges were filed against CEO Lee Bentley Farkas in the U.S. District Court in Alexandria, Virginia, June 15. The following day the U.S. Securities and Exchange Commission hit Farkas with a civil complaint.
Taylor, Bean & Whitaker s accused of pledging fake home loans and fake mortgage-backed securities as collateral for repo loans from now-defunct Colonial Bank, based in Montgomery, Ala.
Taylor, Bean & Whitaker also sold the same fake securities to an off-the-books business it created, which then sold them to Fannie Mae, Freddie Mac and two major European banks, according to prosecutors who claim the complexity of the securities made the fraud difficult to detect.
Farkas “sought to deceive financial firms and the government’s Troubled Asset Relief Program (TARP) by covering up shortfalls at his closely held mortgage lending company based in Ocala, Florida,” according to Bloomberg News. Bloomberg did not mention the repurchase market.