Former Taylor Bean & Whittaker chair Lee Farkas Charged with Securities Fraud

Allison Tussey —  June 16, 2010 — Leave a comment

Ocala.com is reporting that Lee Farkas, 57, former chair of Taylor, Bean & Whittaker was arrested in Ocala, Florida on Tuesday and charged with securities fraud.  According to the article, he is being held without bail and the FBI is scheduled to pick him up from the Marion County, Florida jail where he was booked after his arrest.

The raid of TBW’s headquarters as well as the Orlando branch of Colonial Bank occurred in August of 2009, followed shortly by TBW being barred from servicing federal loans or issuing Ginnie Mae securities.  TBW’s demise was almost immediate.  Colonial Bank was shut down by its regulators nine days later, at the time it was the sixth largest bank failure in US history.

There has been a lot of speculation about the reasons for the law enforcement raids and the subsequent actions by FHA, Freddie, Ginnie and the regulators.  A number of questions were raised simply because of SIG TARP’s involvement in the federal investigations and raids.  Colonial Bancgroup, the holding company for Colonial Bank, was not initially approved to receive TARP funds.  In a Time article on November 13, 2008 which noted a 46% decline in Colonial’s stock and $40M third quarter loss, Michael Levine, a portfolio managaer at Oppenheimer Funds was quoted as saying “If a bank has not received TARP funds, it means one of two things, either you are strong enough that you don’t need the funds, or, two, you are screwed.”

Colonial did apply for TARP funds. It was approved for $550M on the condition that it raise $300M in private capital. Shortly before the deadline to raise that capital, Colonial announced that it had reached an agreement with TBW and that TBW would provide the needed capital in exchange for 75% of Colonial’s common equity.  Unfortunately, that deal fell apart in July, shortly before the August law enforcement raids of both companies.

The documents charging Lee Farkas have not been unsealed and we have not been able to independently confirm the arrest.  The fact that he was arrested indicates that he was likely indicted, not charged by information (United States Attorneys generally charge a defendant by way of “Information” rather than “Indictment” when a plea agreement has been reached prior to the filing of charges.)  Either way, it is likely that the charging documents will clear up some of the mystery that surrounded the implosion of the not-so-little non-bank mortgage lender that believed it could.

 

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Allison Tussey

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