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Ex-Taylor Bean’s Farkas Sues AIG Unit for Unpaid Legal Bills

May 17 (Bloomberg) -- Lee Farkas, the ex-chairman of Taylor, Bean & Whitaker Mortgage Corp. who was found guilty in April of what prosecutors said was a $3 billion fraud scheme, sued a unit of American International Group Inc. over $2 million in legal bills.

Farkas accuses National Union Fire Insurance Co. of Pittsburgh of breaking a contract that he said covers the costs of his trial defense, according to a complaint filed today in federal court in Alexandria, Virginia.

“National Union’s refusal to advance defense costs has resulted in Farkas’s criminal defense counsel, experts, and support service providers not being paid for work performed prior to the conclusion of the criminal trial,” Farkas claims in the complaint.

Prosecutors said Farkas, 58, orchestrated one of the largest and longest-running bank frauds in the U.S. that duped some of the country’s largest financial institutions, targeted the federal bank bailout program and contributed to the failures of Taylor Bean and Montgomery, Alabama-based Colonial Bank.

A federal jury in Alexandria found him guilty April 19 of 14 counts of conspiracy and bank, wire and securities fraud after a two-week trial. Farkas, who was taken into custody after the verdict, is set to be sentenced on June 27.

Mark Herr, a spokesman for New York-based AIG, didn’t immediately return a phone message seeking comment.

Farkas said he received a letter from National Union on April 28 stating that that due to his conviction, the company wouldn’t reimburse his defense costs. Farkas, who says he had more than $4 million available on the policy, says he owes about $2 million in trial costs. He alleges the policy was supposed to cover his costs for the trial and appeals.

Farkas’s lawyer, William Cummings of Alexandria, declined to comment.

The case is Farkas v. National Union Fire Insurance Company of Pittsburgh, 11-cv-00529, U.S. District Court, Eastern District of Virginia (Alexandria).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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