White Collar Criminals

Bankers in their preferred jailPre-conceived notions are funny. They make a sunny day cloudy. They make the successful Department of Justice prosecution of banksters and fraudulent mortgage brokers, like Lee Farkas, look like a failure because every conviction can be appealed to a higher court. Even the staid New York Times found it necessary to point out that sentencing Farkas to thirty years in prison fell far short of the 385 years the prosecution had suggested. And somehow, trying the case in Virginia for crimes committed in Alabama and Florida counts as a demerit.

As chairman of Taylor Bean, Mr. Farkas orchestrated a plot that caused the demise of Colonial Bank and cheated investors and the government out of billions of dollars, prosecutors say.

Still, Taylor Bean was a minor financial firm based in Florida, and the crimes of Mr. Farkas began well before the crisis struck. So while the case is a defining moment for the government, its relative obscurity also highlights the continued struggle to prosecute financial fraud in the wake of the crisis.

Personally, I don’t think our federal government should have to toot its own horn, but who’s to blame for the “relative obscurity” into which the demise of the sixth largest bank has been cast? Never mind that “relative obscurity” as a highlight makes no sense. So, in the interest of fairness, let’s quote what the DoJ has to say for itself.

Colonial Bank and Taylor, Bean & Whitaker (Washington, D.C.): Another notable success was the sentencing of multiple executives from Colonial Bank and Taylor, Bean & Whitaker (TBW). The Washington Field Office investigated a subprime-related conspiracy committed by senior executives at Colonial Bank and TBW, a major U.S. mortgage originator, who conducted a several-billion-dollar accounting fraud through back-dating of loans and the creation of fictitious loans which inflated loan asset values. Additionally, Colonial Bank fraudulently sought to acquire $553 million in TARP funds, which was prevented by the FBI in conjunction with the SIGTARP. In August 2009, TBW closed after it could no longer issue government-backed loans. In August 2009, the Alabama State Banking Department closed Colonial Bank due to liquidity problems. The failure of Colonial Bank represents the sixth- largest bank failure since the creation of the Federal Deposit Insurance Corporation (FDIC). Colonial Bank’s former senior vice president, Cathy Kissick, and TBW chief executive officer Paul Allen pled guilty and, in June 2011, were sentenced to eight years and 40 months in prison, respectively. In April 2011, after a 10-day trial, a jury found former TBW chairman Lee Farkas guilty on 14 counts of bank fraud, wire fraud, and securities fraud. Farkas was later sentenced to 30 years’ imprisonment.

Yes, the reports are coming out a year after the fact. But, that’s how the legal system works. And the matter is still on-going. Delton de Armas plead guilty just last month, but won’t be sentenced until mid June. We may think that justice delayed is justice denied, but the legal system prefers to give people time to change their minds. Farkas’ thirty year sentence, after being found guilty by a jury, likely persuaded some of his cohorts to enter pleas.

Six conspirators to the fraud scheme who pleaded guilty and testified against Farkas at trial were sentenced to prison terms ranging from three months to eight years. De Armas did not testify at Farkas’ trial.

Taylor Bean, based in Ocala, Florida, was servicing more than 500,000 mortgages, including $51 billion of Freddie Mac loans, when it collapsed in August 2009, according to court records.

And there you have the essence of what makes public/private partnerships so very attractive — public cost conversion into private wealth, the very model of “bi-partisan.” Our ex-men (explorers, exploiters, exporters, exhausters, exterminators, etc.) have been doing that for a long time. What’s new is that it’s not only no longer legal; it’s now a crime.

Mr. Farkas, 58 years old, wearing a green prison jumpsuit, read from a statement that said he “strived to be a good person.”

Striving is not enough.

Composite photo created for LikeTheDew.com from photos licensed at 123RF.com

Monica Smith

Monica Smith writes Hannah's Blog. Born in Germany, she came to the United States as a child, living first in California, then after an interval in Chile, in New York. Married to a retired professor at the University of Florida, where she lived for 17 years, she moved to St. Simons Island, Georgia, in 1993 and now divides her time between Georgia and New Hampshire. (New Hampshire, she says, is always interesting during a presidential election.) She and her husband have three children and five grandchildren. Ms. Smith says she "learned long ago that I am not a good team player when I got hired at the Library of Congress, fresh out of college with a degree in political science and proficiency in four foreign languages, to 'edit' library cards and informed my supervisor that if she was going to insist I punch the clock exactly on time, my productivity was going to fall from being the highest to being the same as everyone else's. The supervisor opted to assign me to another building where there was no time-clock. After I had the first of our three children, I decided a paycheck wasn't worth the hassle."