BofA’s Suit Over Taylor Bean Fraud Allowed by Judge to Proceed
Bank of America Corp. won a federal judge’s permission to proceed with some claims against the Federal Deposit Insurance Corp. over $1.75 billion in corporate client losses stemming from a mortgage-fraud scheme at failed lender Taylor, Bean & Whitaker Mortgage Corp.
U.S. District Judge Barbara Rothstein, in a 73-page opinion issued yesterday in Washington, said that the bank’s fraud claim against the FDIC is among those that will proceed to discovery. The judge also allowed some FDIC counterclaims against Bank of America to move forward.
Bank of America was trustee of Ocala Funding LLC, an Orlando-based company, which filed for Chapter 11 bankruptcy protection on July 10 listing assets and debt of more than $1 billion. Ocala Funding, a financing vehicle used and controlled by Taylor Bean, issued asset-backed commercial paper to financial institutions including Deutsche Bank AG, Germany’s biggest bank, and Paris-based BNP Paribas SA, according to court papers.
Bank of America sued in federal court in Washington in October 2010 after the FDIC denied the bank’s claims against Colonial Bank and another financial institution in receivership that bought fake mortgages from Ocala Funding, according to the complaint.
The bank “alleges that Colonial actively concealed its own financial condition, as well as the financial condition of TBW and Ocala, and that these misrepresentations allowed the fraudulent scheme to continue undetected for at least seven years,” Rothstein wrote.
From 2002 through August 2009, Lee Farkas, while he was chairman of Taylor Bean, directed the sale of more than $1.5 billion in fake mortgage assets to Colonial Bank and misappropriated more than $1.5 billion from Ocala Funding, according to court papers.
Farkas is serving a 30-year sentence after being convicted in April 2011 of 14 counts of conspiracy and bank, wire and securities fraud in what prosecutors said was a $3 billion scheme involving fake mortgage assets.
The case is Bank of America v. FDIC, 10-cv-01681, U.S. District Court, District of Columbia (Washington).
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