Raymond E. Bowman, the former president of Taylor, Bean & Whitaker Mortgage Corp., admitted to his role in what prosecutors said was a $1.9 billion fraud that included attempting to deceive the federal bank bailout program.
Bowman, 45, who lives in Atlanta, pleaded guilty today in federal court in Alexandria, Virginia, to one count of conspiracy to commit wire fraud, bank fraud and securities fraud and one count of making false statements. Bowman also agreed to cooperate with prosecutors’ probe of the company.
Federal prosecutors filed a criminal case against Bowman last week before U.S. District Judge Leonie Brinkema, who has presided over cases resulting from an alleged scheme that the U.S. said sought to defraud the government’s Troubled Asset Relief Program and contributed to the failure of Montgomery, Alabama-based Colonial Bank.
Bowman, who is set to be sentenced on June 10, faces a maximum sentence of five years in prison on each count, plus a fine of as much as $500,000 and full restitution to victims, according to prosecutors. Brinkema asked prosecutors whether they would file a forfeiture case against Bowman.
“That remains to be seen,” said Charles Connolly, an assistant U.S. attorney in Alexandria. “The issue we’re exploring is whether the defendant derived any benefit from the fraud scheme.”
Two other Taylor Bean executives, including former Chairman Lee Farkas, were charged previously in the alleged scheme to deceive financial firms and TARP by covering up shortfalls at Ocala, Florida-based Taylor Bean. Taylor Bean was once the largest non-depository mortgage lender in the U.S., the Securities and Exchange Commission said in a statement. Farkas’s trial on 16 counts is set for April 4.
Desiree Brown, Taylor Bean’s former treasurer, and Catherine Kissick, a former Colonial Bank executive, have pleaded guilty to conspiracy to commit wire fraud, bank fraud and securities fraud and agreed to cooperate in the government’s prosecution of Farkas. Both also settled securities cases with the SEC.
Brown and Kissick each face 30 years in prison, a $250,000 fine and an order to pay restitution to more than 250 victims.
Teresa Kelly, an operations supervisor at Colonial Bank who reported directly to Kissick, is scheduled to plead guilty in Alexandria on March 16, according to prosecutors.
Prosecutors said Taylor Bean executives conspired with officials at Colonial Bank to transfer more than $400 million between the bank and the mortgage lender in an effort to hide Taylor Bean overdrafts.
Bowman admitted in court today that from late 2003 through August 2009, he and others at Taylor Bean and Colonial Bank conspired to defraud Colonial Bank, Colonial BancGroup Inc., shareholders of Colonial BancGroup, TARP, and investors in Ocala Funding LLC, which included Deutsche Bank AG and BNP Paribas SA, according to court documents.
The conspirators, in a scheme they called “Plan B,” sent mortgage data to Colonial Bank for loans that didn’t exist or that Taylor Bean had already committed or sold to other third- party investors, according to court records.
For about four years, the conspirators sold fictitious and improperly valued mortgage pools to Colonial Bank.
Bowman intentionally participated in the scheme, which caused “Colonial Bank to purchase tens of millions of dollars of purported assets from TBW that in fact had no value,” according to a statement of facts filed today.
In January 2005, Taylor Bean established a company called Ocala Funding as a financing vehicle for mortgage loans. Bowman learned from Farkas that within a year of its founding Ocala Funding had a “significant collateral deficit.” By August 2009, the deficit was $1.5 billion, according to court papers.
Prosecutors said the conspirators “had caused Colonial Bank and the Federal Home Loan Mortgage Corporation Freddie Mac) to falsely believe that they each had an undivided ownership interest in thousands of the same loans worth hundreds of millions of dollars.”
Bowman said in court papers that he knew co-conspirators took actions that led to the bank filing false financial statements with the SEC.
Lies to FBI
Bowman also admitted lying to agents from the Federal Bureau of Investigation and the Office of the Special Inspector General for TARP when he told them he wasn’t aware of any plan B loans or fraudulent activities at Taylor Bean and Colonial Bank.
Bowman was vice president and director of secondary marketing at Taylor Bean from October 1999 until 2002. That year, he was promoted to president and reported directly to Farkas.
In court today, Bowman said he has “a consulting kind of job” with a mortgage company. Bowman, who said he works from home, didn’t name the company.
Alabama regulators seized Colonial Bank in 2009 and the Federal Deposit Insurance Corp. was appointed as receiver. Colonial BancGroup Inc. (CBCGQ), Colonial’s parent company, and Taylor Bean filed for bankruptcy in 2009.
The case is U.S. v. Bowman, 11-cr-00118, U.S. District Court, Eastern District of Virginia (Alexandria).
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