On June 30, 2011, Lee Farkas was sentenced to serve 360 months in in Federal Prison. He has been serving that time at Coleman Low Federal Correctional Institution in Sumterville, Florida and was scheduled to be released from prison on October 31, 2036.
Yesterday, U.S. District Court Judge Leonie Brinkema in Alexandria, Virginia granted an emergency motion for compassionate release and reduced his sentence to time served. He will be on supervised release for the next 3 years.
The motion was based on the “global health crisis created by the COVID-19 pandemic and the active outbreak of COVID-19 at FCI Coleman” (Emergency Motion for Compassionate Release, August 20, 2020, PACER ID 7748) According to the declaration in support of the motion, Mr. Farkas, who is 67 years old, “has been diagnosed with coronary artery disease, hypertension, and hyperlipidemia … as well as atrial fibrillation, arthrosclerosis, actinic keratosis, gastro-esophageal reflux disease, anemia, sleep apnea, a heart murmur, and has a documented medical history of several bouts of bronchopneumonia” and, while in the custody of the Bureau of prisons, “suffered from gastritis and diverticulosis resulting in
gastrointestinal bleeding and requiring an extensive period of hospitalization.”
According to the declaration, when released, Mr. Farkas plans to reside with his sister, Terri Huber, in Albuquerque, New Mexico.
According to the Orlando Sentinel, prosecutors opposed the release and asked the judge to at least impose home confinement. However, Judge Brinkema said it is “unreasonable to expect him to live 21 years in his sister’s house.”
Mr. Farkas had previously requested compassionate release from the Warden at FCI Coleman and that request was denied on April 8, 2020. He also requested compassionate release under the CARES act but was found ineligible as he had not completed 50% of his sentence. Reconsideration was refused.
As of August 13, 2020, according to the memorandum, FCI Coleman low security had reported 21 staff members and 131 inmates with confirmed positive COVID-19 tests. And additional 63 inmates had recovered while one inmate had died as a result of COVID-19. At FCI Coleman medium security, 31 staff members and 78 inmates were reported with confirmed positive COVID-19 tests with an additional 110 inmates having recovered and one inmate whose death was attributed to COVID-19.
Lee Farkas only served 9 years of his 30 year sentence.
For those of you who don’t remember the Taylor, Bean & Whittaker debacle, Lee Farkas was essentially accused of stealing over a billion dollars through his company, Taylor Bean & Whittaker. TBW overdrew its warehouse operations account and Colonial Bank covered the overdrafts by sweeping money from the investor funding account. The end of day reports would show no overdraft and, first thing in the morning, Colonial would transfer the funds back to the investor funding account. This happened for over a year, during which time the overdraft was growing by tens of millions of dollars a month. By December 2003, the overdraft was $120 million dollars.
As the overdraft grew, it became more difficult to hide and Farkas came up with a plan, referred to as “Plan B” where TBW would put dummy loans on Colonial’s books in order to keep track of the outstanding overdraft – basically, selling fake assets to Colonial or “selling” loans to Colonial that had already been sold to a different bank. No loans were actually transferred to Colonial, the only thing that Colonial received was data. TBW would refresh the data to make it appear that the fake loans were being sold and new loans were being originated. Under Plan B, by mid-2005, the deficiency was over $300M.
When the ‘refreshing’ of these individual loans became burdensome, the overdraft was moved into loan pools. This also reduced the amount of regulatory scrutiny. Under this scenario, TBW would fund an entire pool of fake or double-sold loans through Colonial. The pools would be “recycled” to avoid notice. Over $500M in fake pools were on Colonial’s books by 2009. At that time, Cathie Kissick and her staff at Colonial refused to provide further funds to TBW.
TBW then started to use its own related warehouse facility, Ocala Funding, to generate money. By August of 2009, the deficit at Ocala Funding was around $1.5B 9.
On August 3, 2009, the FBI raided TBW.
According to the government’s argument at trial, the total losses from the scheme were $2.9 Billion. (The above facts are summarized from testimony at Mr. Farkas’s trial)
As a result, TBW and Colonial Bank failed.
All others indicted and convicted with Mr. Farkas have completed their sentences and have released from custody. Teresa Kelly was sentenced to 3 months and was released on 11/14/2011. Sean Ragland was setenced to 3 months and was released on 10/26/2011. Ray Bowman was sentenced to 30 months and was released on 9/20/2013. Paul Allen was sentenced to 40 months and was released on 6/20/2014. Desiree Brown was sentenced to six years and was released on 11/21/2016. Cathie Kissick, who was considered by many to be a victim of Lee Farkas, was sentenced to 8 years in prison and was released on August 3, 2018.
