The man who orchestrated a $1.9-billion mortgage scam, and hoped to cover it up with $533 million from the federal bailout program, could be sentenced to prison for 385 years. Lee Farkas, CEO of one of the largest mortgage companies during the subprime boom, “orchestrated a fraud of staggering proportions—one of the largest bank fraud schemes in this country’s history,” according to a sentencing request filed last week by federal prosecutors.
Farkas was found guilty of 14 charges of selling falsified mortgage loans. Each count carries a life sentence, which is how the prosecutors ended up with the 385-year term.
As for whether that sentence might be a little much, prosecutors say it’s necessary to send a “strong message” to other corporate leaders.
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“[S]entencing him to the maximum penalty allowed by law will send the most forceful and unequivocal message to senior corporate executives that engaging in fraud and deceit in order to pump up your company or line your own pockets is unacceptable and will have severe consequences,” according to the filing by the U.S. District Attorney’s Office in Eastern Virginia.
Other defendants involved in the scam received much shorter sentences. But prosecutors argue that an impossibly long prison term for Farkas is justified because, unlike his co-conspirators, Farkas orchestrated the scam, never pleaded guilty, never cooperated with the government, and lied at trial. The district attorney also wants Judge Leonie Brinkema to fine Farkas $42 million.
The scope of the scam was staggering. Farkas was CEO of Tyler, Bean & Whitaker, one of the largest mortgage companies during the subprime boom. He and his fellow managers sold the same mortgages to three different investors, including Colonial Bank, one of the 25 largest banks on deposits in the country.
Farkas used the money he stole to buy mansions in Georgia and Florida, invest in bars and restaurants, and purchase a private jet worth $28 million.
When the economy went south and homeowners began defaulting on their mortgages, Farkas tried to get $533 million from the federal TARP bailout to repay his investors. The government turned Farkas down, Colonial Bank went bankrupt, and federal investigators started looking into his company’s books.
Image: Tim Pierce, via Flickr