A top Justice Department official says a sweeping guilty verdict in a Florida mortgage fraud case adds another face to the financial crisis.
A federal jury in Virginia on Tuesday found Lee Farkas, the former chairman of mortgage lender Taylor Bean and Whitaker, guilty on all 14 criminal counts in what authorities say was a $2.9 billion fraud that contributed to the 2008 financial crisis.
"The financial crisis has many faces, and today, Lee Farkas' face is one of them," said Assistant Attorney General Lanny Breuer in a conference call with reporters following the verdict.
Breuer called the scheme "one of the largest bank fraud schemes in history."
Not only did Taylor Bean and Whitaker fail in 2008, but so did TBW's lender, Colonial Bank. One of the 50 largest banks in the country, Colonial failed in 2009, but not before attempting to access half a billion dollars in federal bank bailout funds.
Prosecutors said that beginning in 2002, TBW used overdrafts from Colonial to hide its failing mortgages, and got millions in funding for mortgages that did not exist. Another company, Ocala Funding, bundled those mortgages into asset-backed securities and failed as well.
Farkas' conviction, coming on top of six other guilty pleas in the case, gives the Justice Department an important victory at a time when officials have been criticized for a lack of high-profile convictions following the financial crisis.
But Breuer insisted the feds have brought plenty of financial fraud cases in the wake of the crisis, including the Thomas Petters and Bernard Madoff Ponzi schemes.
He dismissed the idea that the Farkas verdict would give prosecutors momentum to pursue more cases involving banks and mortgage-backed securities at the heart of the crisis.
"I don't think this changes anything," Breuer said.
He said prosecutors would "continue to push forward," bringing cases where appropriate. But he said the government would not prosecute individuals just because "it might be popular" to do so.
Farkas faces sentencing on July 1.