Key Lending Exec Guilty in $2.9B Fraud
Lee Farkas convicted of bilking Colonial Bank at height of crisis
By Kevin Spak,  Newser Staff
Posted Apr 20, 2011 11:48 AM CDT
This photo provided by the Marion County, Fla. Sheriff's Office shows Lee Bentley Farkas.   (AP Photo/Marion County Sheriff's Office, File)
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(Newser) – Lee Farkas, the founder of what was once one of America’s largest mortgage lenders, has been convicted of fraud in a huge scheme to bilk investors with bogus mortgages. Prosecutors said Farkas had orchestrated a plot in which the firm he chaired, Taylor, Bean & Whitaker, secretly overdrew Colonial Bank’s accounts, then covered it up by selling the bank $1.5 billion in “worthless” and “fake” mortgages—which the government cheerfully guaranteed, the New York Times reports.

Farkas and other executives also created a subsidiary called Ocala Funding, which sold commercial paper to big firms and never made good on it. The schemes wound up taking in $2.9 billion and helped destroy Colonial Bank. Farkas personally pocketed about $20 million, and now faces decades in prison. The case marks a rare financial crisis win for the Justice Department—or, as Gawker snarkily puts it, “One Rich Guy Finally Convicted for Mortgage Meltdown.”