History Taylor, Bean & Whitaker

1 history

1.1 fbi raid, suspension, , closure
1.2 taylor, bean & whitaker collapse , bankruptcy
1.3 pricewaterhousecoopers lawsuit
1.4 ocala funding; lawsuit deutsche bank , bnp paribas
1.5 executive convictions

history

taylor, bean & whitaker closed $35 billion in residential mortgage loans in 2007. employed 2,000 workers, , fifth-largest issuer of ginnie mae securities. 2009, servicing more 500,000 mortgages, including $51.2 billion of freddie mac loans.

fbi raid, suspension, , closure

on august 3, 2009, fbi special agents raided company s headquarters in ocala, florida, in connection investigation related company s acquisition of majority stake in colonial bancgroup, once 1 of 25 biggest depository banks in u.s. taylor, bean & whitaker had signed deal on march 31, 2009, become majority owner of colonial bancgroup in $300 million equity stake. on august 4, 2009, federal housing administration (fha) suspended company issuing fha mortgage loans , ginnie mae mortgage-backed securities.

on august 5, 2009, taylor, bean & whitaker ceased business operations, , terminated of approximately 2,000 employees @ headquarters. company filed bankruptcy protection on august 24, 2009.

this came after alabama state banking department, colonial bank s regulator, seized bank , appointed fdic receiver.

both companies brought down fraud started in 2002 involving individuals @ both colonial bank , taylor, bean & whitaker.

taylor, bean & whitaker collapse , bankruptcy

after termination of 2,000 employees, entire board of directors of taylor, bean & whitaker resigned. in stead, 2 newly appointed independent directors, bill maloney , bruce layman, operated company neil luria of navigant capital advisors, appointed chief restructuring officer of company. office of thrift supervision, taylor, bean & whitaker s government regulator, approved appointments.

subsequently, judge jerry a. funk of united states bankruptcy court approved taylor, bean & whitaker s liquidation plan, created trust distribution taylor, bean & whitaker s creditors: taylor, bean & whitaker plan trust. trust run neil luria.

pricewaterhousecoopers lawsuit

the bankruptcy trustee taylor, bean & whitaker mortgage corp., once 1 of nation’s biggest privately held mortgage companies, suing pricewaterhousecoopers auditor of colonial bank, seeking $5.5 billion in damages. trustee alleged in 2013 lawsuit pricewaterhousecoopers negligent in not detecting massive fraud scheme brought down taylor, bean & whitaker , helped trigger 2009 collapse of colonial bank, montgomery, alabama bank $25 billion in assets, 1 of biggest u.s. bank collapses during great recession.

the closely watched case lead billions of dollars in damages, depending on how jury answers fundamental question in accounting: how responsibility auditors have catching fraud?

pricewaterhousecoopers has maintained in court documents responsibility follow accounting principles — might not detect fraud. in pretrial brief issued trustee, former pricewaterhousecoopers chairman dennis nally quoted in 2007 wall street journal article saying “audit profession has had responsibility detection of fraud.”

ocala funding; lawsuit deutsche bank , bnp paribas

in 2005, taylor bean created , subsequently operated special-purpose entity subsidiary, ocala funding. ocala conduit purchased home loans, , bundled them securities sold freddie mac , other investors. funded mortgage loan business selling $1.75 billion of worthless asset-backed commercial paper short-term notes deutsche bank , mortgage subsidiary of bnp paribas. deutsche bank bought $1.2 billion of notes, , bnp had purchased $480.7 million in notes.

ocala hired bank of america both trustee , collateral agent ocala commercial paper. prosecutors said ocala funding engaged in stated 1 of largest bank frauds in united states history.

in litigation unrelated taylor, bean & whitaker plan trust, deutsche bank , bnp paribas sued bank of america on $1.75 billion in losses stemming fraud, saying agreements required ocala hold $1.6 billion in cash or mortgage loans collateral deposited bank of america, , bank of america breached custodial , trustee obligations , improperly transferred billions of dollars of funds serving collateral @ ocala s request.

the case being heard judge robert sweet in united states district court southern district of new york. sweet allowed of case proceed in march 2011, writing deutsche bank , bnp paribas had stated plausible claim against bank of america.

in june 2012, judge sweet dismissed counter-suit bank of america corp. against securities units of bnp paribas , deutsche bank, alleging negligence , breach of fiduciary duty on behalf role in sale of notes issued ocala funding. sweet held units, acting brokers in sale of ocala notes, owed no duty … investigate or verify representations made in private placement. lawsuit settled in april 2015.

executive convictions

six individuals have pled guilty roles in fraudulent scheme.

on april 19, 2011, federal jury in alexandria, virginia, convicted lee farkas, majority owner of company, of 14 counts of securities fraud, bank fraud, , wire fraud , conspiracy commit fraud. according government case, multibillion-dollar fraud caused downfall of colonial bank , cheated investors , government. fraud began in 2002 when taylor overdrew account colonial bancgroup several million dollars. taylor bean promised cover amount end of day in process known sweeping. when overdrafts grew on $100 million, mid-level taylor bean executives sold colonial bancgroup $1 billion in mortgages did not own. farkas , co-conspirators caused colonial bancgroup file materially false financial data sec regarding assets in annual reports contained in forms 10-k , quarterly filings contained forms 10-q. colonial bancgroup s materially false financial data included overstated assets mortgage loans had little no value.

during sentencing hearing on june 30, 2011, farkas read statement saying strived person. however, federal district judge leonie brinkema replied did not observe genuine remorse, , sentenced 58-year-old farkas 30 years in federal prison—at age, life sentence. in 2012, federal appellate court upheld convictions , sentence. in 2013 said innocent , asked federal judge set aside convictions , prison sentence, arguing trial , appellate lawyers provided ineffective assistance, , trial lawyers should have sought judgment of acquittal because evidence against him insufficient. in 2014 prison interview, farkas stated gets depressed lot of days , has lost 43 pounds , of friends. no other senior wall street executives have been prosecuted crisis-related conduct. farkas serving sentence in medium-security facility @ butner federal correctional complex in butner, north carolina, , scheduled release in 2037.

the company s former chief executive , lead manager ocala funding (paul r. allen, admitted allowing $1.5 billion in collateral misappropriated ocala , sentenced in 2011 40 months in prison, followed 2 years of supervised release) , treasurer (desiree brown, sentenced 6 years in prison) pleaded guilty , cooperated in case against farkas, , other executives received sentences ranging 3 months (senior financial analyst sean ragland) 8 years (catherine kissick, senior vice president , head of mortgage warehouse loan division @ colonial bank).