$1.9B fraud scheme tied to downfall of Colonial Bank

Farkas, who led Florida-based Taylor, Bean & Whitaker, was arrested Tuesday in Ocala, Fla., after being indicted by a federal grand jury in Alexandria on bank fraud and other charges. Taylor Bean was one of the nation's largest privately held mortgage lending companies before it filed for bankruptcy protection last year, and officials said the fraud scheme precipitated its collapse as well.

Court documents said Farkas and co-conspirators at both companies misappropriated more than $400 million from Colonial and about $1.5 billion from a Taylor Bean-owned firm to cover Taylor Bean's operating losses. Farkas, 57, is also charged with trying to defraud the government out of $553 million in Troubled Asset Relief Program bank bailout funds as the losses mounted. Officials said the scheme involved creating false documents and moving hundreds of millions of dollars between Taylor Bean, Colonial and other entities.

"The fraud alleged here is truly stunning in its scale and in its complexity,'' Assistant Attorney General Lanny A. Breuer of the Criminal Division said at a news conference.