* Farkas convicted in 2011 of $2.9-billion bank fraud
* One of biggest prosecutions stemming from financial crisis
* 4th Circuit says jury instructions were proper
* Farkas serving 30-year prison term; appeal plans unclear
By Jonathan Stempel
June 20 A federal appeals court on Wednesday
upheld the conviction of former Taylor, Bean & Whitaker Mortgage
Corp Chairman Lee Farkas, who was accused of masterminding a
$2.9 billion bank fraud, one of the largest in U.S. history.
The 4th U.S. Circuit Court of Appeals in Richmond, Virginia
rejected Farkas' claims that the trial judge had violated his
Fifth Amendment rights by instructing the jury improperly, and
also denied him his Sixth Amendment right to counsel. It also
upheld a $38.5 million forfeiture order.
Farkas, 59, is serving a 30-year prison term after a jury in
Alexandria, Virginia convicted him in April 2011 on 14 counts of
bank fraud, securities fraud, wire fraud and conspiracy.
He is among the highest-ranking executives convicted over
activity related to the U.S. housing and financial crises. No
top executives at large Wall Street or commercial banks have
been convicted of criminal charges.
Prosecutors said Farkas' fraud ran from 2002 to 2009, ending
in Taylor Bean's bankruptcy and the collapse of Colonial
BancGroup Inc, a large southeastern U.S. bank.
Wednesday's ruling "confirms that justice was done in this
case," said Lanny Breuer, assistant attorney general for the
U.S. Department of Justice's criminal division.
A decision on whether Farkas will appeal has not been made.
"We have been very clear with Lee that this is a difficult
undertaking," David Coorssen, a lawyer who argued the appeal of
Farkas' conviction, said in a phone interview. "While we are
very disappointed for Lee, he is not going to be greatly
surprised by this ruling."
Several other former Taylor Bean officials have pleaded
guilty, including former Chief Financial Officer Delton de Armas
Taylor Bean had been based in Ocala, Florida, and was the
12th-largest U.S. mortgage lender.
Farkas claimed that trial judge Leonie Brinkema made it too
easy for the government to meet its burden of proof, by telling
jurors that their "sole interest is to seek the truth" and by
refusing to explain the meaning of "beyond a reasonable doubt."
But Judge Andre Davis wrote for a three-judge panel of the
4th Circuit that the jury instructions "taken as a whole" were
proper, given the emphasis on the reasonable doubt standard and
that jurors not surrender their honest beliefs.
Davis said the trial judge was correct to appoint a lawyer
to defend Farkas rather than let him use his own, and in
refusing to move the case to another court.
Prosecutors said Farkas and other Taylor Bean officials hid
losses by shuffling money among Colonial accounts, and by
selling nonexistent or worthless mortgages.
Farkas had also attempted to help Montgomery, Alabama-based
Colonial obtain a $553 million loan from the federal bank
bailout program, but money was never disbursed.
The FDIC shut down Colonial in August 2009, and BB&T Corp
bought most of its assets.
Colonial's collapse was the sixth-largest U.S. bank failure
and the third largest since 2007.
Farkas is not eligible for release from prison until May
2037, federal records show. He is housed at the Butner, North
Carolina complex, which also houses swindler Bernard Madoff.
The case is U.S. v. Farkas, 4th U.S. Circuit Court of
Appeals, No. 11-4714.