Former Colonial Senior Vice President Catherine Kissick told jurors yesterday that she felt powerless and had no choice but to continue going along with an ever growing fraud that ended up toppling the largest non-depository mortgage lender in the United States and wrecked the once mighty banking empire founded and run by Auburn University megatrustee, Bobby Lowder.
Kissick was testifying in the the trial of Lee Farkas, former CEO of Taylor Bean & Whitaker. TBW had become Colonial’s largest mortgage lending customer of the financial giant’s warehouse loan business. Colonial financed billions in mortgages originated by TBW, many worthlessly toxic mortgages that were later packaged and sold to Fannie Mae and Freddie Mac. But financial difficulties at TBW were hidden in an elaborate, multimillion dollar check kiting scheme until the banking crisis brought such intense pressure that the scheme was impossible to continue.
Prosecutors also allege that Farkas, working in close concert with a “senior Colonial BancGroup officer” concocted a second scheme to defraud the United States’ Troubled Asset Relief Program out of hundreds of millions. Had the scheme gone undetected, Colonial Bank would have received a massive infusion of capital that may have allowed both firms to survive the crisis. However, federal authorities uncovered the scam, raided TBW and both companies fell into bankruptcy in the summer of 2009.
In another development, the Farkas defense team has won its battle to gain access to documents and email evidence flowing between Colonial and attorneys at Akerman Senterfitt LLP. Via Law360.com (subscription required), Farkas’ attorneys said the needed the evidence to bolster their defense, and that the preparation of Farkas’ defense had been hampered by those documents being placed behind the shield of attorney client privilege.
It’s a win for Farkas and a loss for Colonial and especially for Bobby Lowder, who most believe is the “Senior Colonial BancGroup” official that the government claims Farkas was conspiring with, right up until the day the FBI raided offices, carted off boxes, and padlocked doors.