Former Taylor Bean president Bowman pleads guilty in fraud scheme

By Caroline Salls

Pittsburgh, March 14 - Former Taylor, Bean & Whitaker Mortgage Corp. president Raymond Bowman pleaded guilty Monday to conspiring to commit bank, wire and securities fraud and lying to federal agents about his role in a fraud scheme that contributed to the failures of Taylor Bean and Colonial Bank, according to a Department of Justice news release.

The department said Bowman faces a maximum penalty of five years in prison on the conspiracy charge and a maximum penalty of five years in prison on the false statements charge.

Sentencing is scheduled for June 10.

According to court documents, Bowman admitted that he and his co-conspirators, including former Taylor Bean chairman Lee Farkas, schemed to defraud Colonial Bank, Colonial BancGroup Inc. and public investors from 2003 through August 2009.

The department said Bowman admitted that he knowingly and intentionally participated in a fraud scheme that caused Colonial Bank and Colonial BancGroup to purchase tens of millions of dollars of worthless assets, caused Colonial BancGroup to report false information in its financial statements and artificially inflated the value of Taylor Bean's mortgage servicing rights.

Court documents state that Bowman learned in early 2002 that Taylor Bean began running overdrafts in its master bank account at Colonial Bank because of Taylor Bean's inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations.

Fraud cover-up

In the fall of 2003, Bowman, along with Farkas and other co-conspirators, engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one Taylor Bean account with excess funds into another, and later through the fictitious sales of mortgage loans to Colonial Bank.

The department said the conspirators accomplished this by sending mortgage data to Colonial Bank for loans that did not exist or that Taylor Bean had already committed or sold to other third-party investors.

According to a statement of facts, Bowman believed that data for the scheme included data for loans that did not exist and knew that without the fictitious sale Taylor Bean would likely fail and go out of business.

Valuations manipulated

In addition, the release said Taylor Bean used its mortgage servicing rights (MSR) to collateralize a working capital line of credit at Colonial Bank, and it retained third-party companies to conduct periodic valuations.

The court documents said Bowman admitted that he, at Farkas' request, directed co-conspirators to manipulate Taylor Bean's borrowing base by billions of dollars to artificially inflate the MSR valuations and to avoid a margin call.

In 2005, Taylor Bean established a wholly owned special purpose entity called Ocala Funding LLC as a financing vehicle to provide it with additional funding for mortgage loans, the release said.

The facility obtained funds for mortgage lending from the sale of asset-backed commercial paper to financial institutions.

In his statement of facts, Bowman admitted that he learned from Farkas and other co-conspirators at Taylor Bean that within a year of its creation, Ocala Funding had a significant collateral deficit.

As Bowman acknowledged, the government could prove that by August 2009, that deficit had grown to $1.5 billion and Taylor Bean had caused Colonial Bank and the Federal Home Loan Mortgage Corp. (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 lies

The department said Bowman admitted Monday that he falsely told agents in August 2009 that he was not aware of "plan B" loans and that he was not aware of any fraudulent activities between Colonial Bank and Taylor Bean.

The department said Farkas was arrested in June 2010 and charged in a 16-count indictment for his role in the alleged fraud scheme. His trial is scheduled to begin in April.

As previously reported, former Taylor Bean treasurer Desiree Brown pleaded guilty on Feb. 24 for her role in the scheme, and former Colonial Bank senior vice president and mortgage warehouse lending division head Catherine Kissick pleaded guilty on March 2.

Taylor Bean, an Ocala, Fla.-based mortgage banker, filed for bankruptcy on Aug. 24, 2009 in the U.S. Bankruptcy Court for the Middle District of Florida. Its Chapter 11 case number is 09-07047.

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