Mortgage Exec Sentenced for Fraud

June 24, 2011

Paul R. Allen, a chief executive of Taylor Bean & Whitaker, was sentenced this week to three and a half years in prison for his role in a $3 billion fraud scheme. Considered one of the largest corporate frauds in U.S. history, it even led to a collapse of a bank.

Allen is the sixth person to be sent to prison as part of the scheme. The conviction of Allen and TBW’s former chairman, Lee Farkas, who still awaits sentencing on June 27, are considered to be some of the highest profile executives in the housing and financial industries to receive prison time in the aftermath of the housing market collapse, the Washington Post notes.

“Mr. Allen’s sentence ... sends the message that unless executives expose and stop fraud when they first learn of it, they will be punished,” said Neil MacBride, U.S. attorney for the Eastern District of Virginia.

TBW was once one of the country’s largest privately held mortgage lending companies. It closed in 2009 after investigators found the company trying to cover up its major losses by moving money between accounts at banks and selling mortgages that never existed or had previously been sold. It’s blamed on contributing to the collapse of Colonial Bank, which was the sixth-largest bank failure in U.S. history.

Prior to its collapse, TBW was one of the nation’s largest privately held mortgage lenders with some $20 billion in mortgage sales a year.

Source: “Mortgage Executive Sentenced to Prison,”Washington Post (June 22, 2011)