Jury selection and opening arguments are expected today, as former Taylor Bean & Whitaker CEO Lee Farkas goes on trial in a $2 billion bank, wire and securities fraud case. When it filed for bankruptcy in summer 2009, it was the largest non-depository mortgage lender in the United States.
The alleged scheme also took down Colonial BancGroup, which was the sixth largest bank failure in US history. At the time, TBW was Colonial’s largest customer. The mortgage company borrowed billions from Colonial and relent the money to both prime and subprime borrowers. TBW then repackaged those loans and sold them to Ginnie Mae, Fannie Mae and Freddie Mac. According to prosecutors and court documents, TBW sold the same loans twice, and on more than one occasion, three times.
In addition, TBW and Colonial execs are alleged to have carried out a seven-year, multibillion dollar check kiting scheme to hide TBW’s liquidity issues. When the banking crisis threatened the two lending giants, prosecutors allege that the two firms concocted a scheme to defraud the United States Troubled Asset Relief Program (TARP) and secure more than a half billion in bailout money for Colonial.
Court filings allege that senior Colonial BancGroup and TBW officials were in near constant communication, right up until the FBI raided offices and state banking regulators seized Colonial’s banking operation.
Five executives—three from TBW and two from Colonial—have pleaded guilty and their testimony in the case is expected to be a key part of the prosecution. Farkas himself has entertained a deal for his testimony in the ongoing fraud case, but no deal was reached and the trial is set to begin today—barring a last minute development.
Exit Question: Where will the Micromanager be, today—In court, watching an alleged co-conspirator go on trial for a scheme he was almost certainly neck deep in, or preparing his own defense against a near certain indictment?