Updated 2:58 p.m.
Federal prosecutors are targeting tens of millions of dollars in cash and property allegedly tied to the former chairman of Taylor, Bean & Whitaker, one of the country’s largest privately held mortgage lending companies, who was indicted this week on fraud charges.
Justice Department officials announced today that Lee Farkas, the former TBW chairman, has been charged in a 16-count indictment in the U.S. District Court for the Eastern District of Virginia for allegedly orchestrating a $1.9 billion fraud scheme that contributed to the collapse of Colonial Bank. Farkas was arrested Tuesday night in Ocala, Fla.
In charging documents, prosecutors listed vehicles and property that the government wants Farkas to forfeit. Among the vehicles: a 1963 Rolls Royce, a 1929 Ford Model A, a 1970 Cadillac El Dorado and a 1958 Mercedes Benz Cabriolet. Authorities said Farkas owns property in Fort Lauderdale, Ocala and Atlanta.
In remarks at a press conference today, administration officials, including Assistant Attorney General Lanny Breuer of the Justice Department, said the alleged fraud began as early as 2002. In an effort to conceal mounting operating losses at TBW, Farkas and co-conspirators—who are not named—allegedly misappropriated money from Colonial Bank’s mortgage lending division in Orlando and from Ocala Funding, a mortgage lending facility controlled by TBW. Click here for a copy of the indictment.
Charging documents also allege that Farkas committed wire and securities fraud in trying to convince the federal government to provide Colonial Bank with more than $553 million in funds from the Troubled Asset Relief Program. That money was never paid out.
“This alleged fraud scheme is an example of the damaging and destabilizing impact financial crimes can have on our nation’s financial institutions,” Breuer said in a June 16 statement. “Individuals and companies that violate the law in a reckless pursuit of profits must be held accountable for their crimes.”
At today’s press conference, Breuer called the alleged fraud “truly stunning in its scale and complexity.” He noted that investigators used "covert techniques" to build the criminal prosecution -- continuing a trend in white collar criminal investigations.
Breuer, however, declined to comment on the nature of the covert techniques. In recent speeches, Breuer has said investigators are increasingly using wiretaps in white collar investigations.
Federal prosecutors want Farkas detained pending trial as a flight risk and filed court papers in the U.S. District Court for the Middle District of Florida urging a trial judge to prevent his release from custody.
A lawyer for Farkas, Gerald Houlihan of Miami’s Houlihan & Partners, has filed court papers to push back a detention hearing until Thursday. Houlihan said in a motion to continue that he needs a day to consult with Farkas. (Farkas is also represented by Anthony Cochran of Atlanta's Chilivis, Cochran, Larkins & Bever.)
Houlihan said this afternoon that he was disappointed the Justice Department authorized a physical arrest of Farkas instead of allowing him to surrender on his own. "This is the kind of grandstanding that is unnecessary," said Houlihan, who was on his way to Ocala this afternoon to meet Farkas. "I think this reflects badly on the Justice Department to have made an arrest in a case where someone has been around for all of this period of time."
Farkas looks forward to defending against the charges, Houlihan said. The government, he said, has "jumped to conclusions that are unjustified from the facts."
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