The former chairman of a private mortgage lending company was arrested by federal agents Tuesday night in a case involving surreptitious Blackberry messages, a $1.9 billion fraud and the collapse of one of the 50 largest banks in the U.S.
Lee Bentley Farkas faces charges for conspiracy and bank, wire and securities fraud. The Justice Department announced the arrest on Wednesday morning.
According to the DOJ, Farkas and his co-conspirators made efforts to disguise their alleged fraud by communicating using a feature on their Blackberry phones that allowed them to send so-called “PIN messages,” which are similar to text messages but not routed through or saved on a computer server.
According to the indictment, Farkas and other employees of the mortgage lending company Taylor, Bean & Whitaker (TBW) overdrew from company accounts at Colonial Bank in Orlando, Fla., to cover cash shortfalls. They then moved money between the company’s accounts to disguise the overdrafts and shortfall. To make up for the losses, Farkas and others allegedly sold fake mortgage loan assets to Colonial Bank and then urged the bank to keep the assets on their books even though they were worthless.
Investigators began looking at Colonial BancGroup, the parent company of Colonial Bank, in February 2009, when the company applied for $550 million in funds from the Troubled Asset Relief Program (TARP). The Alabama State Banking Department later seized Colonial Bank, and the Federal Deposit Insurance Corporation was named as its receiver. Both Colonial BancGroup and TBW filed for bankruptcy in August 2009.
The scheme by Farkas and TBW also led Colonial BancGroup to make false representations to the Securities and Exchange Commission concerning the value of its assets. The company never received TARP funds, but it falsely claimed to have secured outside funding to meet the requirements of the conditional approval of its application for TARP funding.
Farkas and others also allegedly misappropriated several hundred million of dollars from Ocala Funding, a company that sold asset-backed commercial paper.
According to a DOJ court filing, on the day federal agents executed a search at TBW, Farkas allegedly sent Blackberry PIN messages to his co-conspirator saying the government “will figure out that the agency stuff was recycled if they get [another co-conspirator's] laptop.”
He also said that the government would continue to use all investigative tools to combat financial crimes.
“This arrest and these charges send a strong message to corporations and corporate executives alike that financial fraud will be found, and it will be prosecuted. And it will be pursued using every investigative tool at our disposal,” Breuer said. ”Indeed, this investigation benefited from the use of covert techniques – a tactic that has been seen in other recent white collar criminal prosecutions and one that will continue to be employed wherever feasible and appropriate.”
Breuer declined to elaborate on the “covert techniques” used. The indictment and the government’s motion for pre-trial detention cite e-mails, other electronic communications and recorded phone calls between Farkas and the other conspirators.
U.S. Attorney for the Eastern District of Virgina Neil MacBride said at the news conference that co-conspirators in the case internally referred to the fabricated assets as “crap.”
MacBride described the scheme as a “sophisticated shell game” and said they attempted to defraud the government of TARP funds through scheme they called “Project Squirrel.”
The government said it is seeking approximately $22 million in forfeitures from Farkas, which includes five properties in Florida and Georgia as well as nine vehicles — including a 1929 Ford Model A; a 1963 Rolls Royce; a 1961 Porsche CV; and a 1958 Mercedes Benz Cabriolet 220.
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Neil MacBride, the U.S. Attorney for the Eastern District of Virginia, announced on Friday the formation of a financial fraud task force that could to allow the district to use its reputation as a “rocket docket” to expedite fraud cases.
The Virginia Financial and Securities Fraud Task Force will consist of representatives from the U.S. Attorney’s office, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Virginia Attorney General’s office and the Virginia State Corporation Commission. The U.S. Attorney’s office also has an existing working group which consists of representatives from the FBI, U.S. Postal Inspection Service, and the Internal Revenue Service Criminal Investigation Division.
“Corporate fraud scandals have eroded public confidence in the nation’s financial markets,” MacBride said at a news conference in Richmond Friday. “White collar criminals have looted the pocketbooks and retirement accounts of working Americans. Crimes committed on Wall Street are felt on Main Streets everywhere.”
“The complex financial crimes we confront are national in scope,” MacBride said. “Criminal and civil authorities across the country must utilize every tool possible to prevent and punish fraud. That’s what this task force will do.”
MacBride said that Eastern Virginia has the ability to deal with nearly any fraud case, since nearly all official reports emerging from publicly traded companies are sent to the SEC’s EDGAR computer server in Alexandria, Va.. He also said that the Federal Reserve Bank in Richmond, Va. “is one of the primary hubs for U.S. wire transfers, which is an additional basis for venue in many fraud cases.”
Because of its proximity to Wall Street, the U.S. Attorney’s office in the Southern District of New York has taken the lead on most financial cases.
The new task force could put the Eastern District on the same level as SDNY, although SDNY because of its larger size will likely still occupy the primary role in financial fraud prosecutions. According to a November 2008 Inspector General’s report, SDNY had about 260 full-time attorneys in the office in fiscal 2007. By comparison, EDVA had 142.
As of April 2010, 23 U.S. Attorneys offices’ had task forces focusing on mortgage fraud, according to the DOJ.
MacBride said the task force was a step in implementing the goals of the President’s Financial Fraud Enforcement Task Force.
“We have the legal authority to prosecute cases of national significance in the Eastern District of Virginia, regardless of where the fraud occurs,” MacBride said.
Robert Khuzami, the Director of the SEC’s Division of Enforcement, attended the news conference in Richmond and praised the creation of the new task force.
“Financial fraud schemes can be sophisticated, difficult to detect, and span multiple jurisdictions,” Khuzami said. “Opportunities to coordinate civil and criminal law enforcement efforts, such as those provided by this task force, are vital to combating financial fraud.”
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The U.S. Attorney for the Eastern District of Virginia has announced the creation of two leadership positions within his Alexandria, Va.,-based office, the Richmond Times-Dispatch reported today.
U.S. Attorney Neil MacBride promoted Assistant U.S. Attorney Mark Lytle to be the office’s public integrity coordinator and Assistant U.S. Attorney Charles Connolly to be the deputy chief of the Alexandria division’s fraud unit.
Lytle prosecuted former Rep. William Jefferson (D-La.), who was convicted last year of taking bribes. MacBride said he created the public integrity coordinator position as part of an effort to better handle cases involving corruption by government officials, according to the newspaper. The number of corruption cases filed in the Eastern District of Virginia rose from from 11 in 2005 to 21 in 2009, according to the Times-Dispatch.
“The Eastern District of Virginia must play an integral role in ensuring that those who hold public office live up to the public’s trust,” MacBride said in a statement to the newspaper.
Connolly, who has served as a federal prosecutor since 2002, was promoted to help expand the office’s efforts to prosecute economic crimes, according to The Associated Press. MacBride is also in the process of hiring three additional Assistant U.S. Attorneys to handle financial crimes including mortgage and securities fraud, the Times-Dispatch said.
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Attorney General Eric Holder will attend a ceremonial swearing-in Monday for Massachusetts U.S. Attorney Carmen Ortiz, a spokesperson for Ortiz’s office told Main Justice.
Ortiz was officially sworn in on Nov. 9, a few days after the Senate confirmed her. But U.S. Attorneys often have a later ceremonial investiture with local, state and federal leaders in attendance.
The Attorney General has attended six U.S. Attorney investitures so far. He was at the swearing-in ceremonies for Paul Fishman in New Jersey, Timothy Heaphy in the Western District of Virginia, Neil MacBride in the Eastern District of Virginia, Preet Bharara in the Southern District of New York, B. Todd Jones in Minnesota and Joyce Vance in the Northern District of Alabama.
Read our previous article here about the warm glow U.S. Attorneys get when the Attorney General shows up at their swearing-in ceremonies.
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Attorney General Eric Holder is slated to attend the swearing-in ceremony for the New Jersey U.S. Attorney on Monday, the Justice Department announced today.
Paul Fishman officially took the helm of the New Jersey U.S. Attorney’s Office on Oct. 14. The Senate confirmed him on Oct. 7. Later that month, Holder tapped Fishman to be on the Attorney General’s Advisory Committee of U.S. Attorneys, a body that serves as the voice of the U.S. Attorneys at DOJ headquarters in Washington.
Fishman replaced Ralph Marra, who served as acting U.S. Attorney after Republican Chris Christie stepped down to mount a successful run for governor.
The Attorney General has attended five U.S. Attorney investitures thus far. He was at the swearing-in ceremonies for Timothy Heaphy in the Western District of Virginia, Neil MacBride in the Eastern District of Virginia, Preet Bharara in the Southern District of New York, B. Todd Jones in Minnesota and Joyce Vance in the Northern District of Alabama.
Read our previous article here about the warm glow U.S. Attorneys get when the AG shows up at their investitures.
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Attorney General Eric Holder and Deputy Attorney General David Ogden were slated to attend the investiture of Eastern District of Virginia U.S. Attorney Neil MacBride on Friday. But unavoidable circumstances kept one official home and made another late.
Ogden, who was supposed to give remarks at the ceremony, was unable to attend due to illness, Eastern District First Assistant U.S. Attorney Dana Boente told about 100 Justice Department officials, judges, family members and friends gathered at the Albert V. Bryan U.S. Courthouse in Alexandria, Va.
Holder made it, but he arrived late because he was coming from a funeral.
“I know most of you came to hear the Attorney General and Deputy Attorney General, but it is 2:13 and I’m up,” said MacBride, after some reshuffling in the program brought him up to the podium to deliver his remarks.
Then, as if on cue, the Attorney General came into the courtroom as MacBride discussed what he’s learned from Holder, who once worked with MacBride in the District of Columbia U.S. Attorney’s office.
Holder, a former D.C. U.S. Attorney, said MacBride is a friend, who has “intelligence, diligence and integrity.”
“Wherever he has served, he has served well and with distinction,” said Holder, who has named MacBride to the Attorney General’s Advisory Committee of U.S. Attorneys. “I know this because I hired Neil.”
Eastern District Court Judge Henry Coke Morgan Jr. recalled being a reference for MacBride, a former Eastern District Court clerk. Morgan said he was reluctant to give up MacBride to Holder.
“I started to wonder if the whole, unvarnished truth would be the best option,” Morgan said at the ceremony. He added: “I soon discovered truth was the only option because I was being examined by the head of the office, Eric Holder.”
MacBride, who is the first clerk from the Eastern District to become U.S. Attorney, recalled one of his more embarrassing days in Morgan’s courtroom 17 years ago.
As a clerk, he had to start court proceedings by saying, “All rise. Oyez, oyez, oyez, all manner of persons having any matter to present before … judges in the United States District Court in and for the Eastern District of Virginia may at present appear and they shall be heard. God save the United States and this honorable court. Court is now in session, please be seated.”
But the last time he was in the Alexandria courthouse, MacBride forgot his notes and was only able to get out “All rise. Oyez, oyez, oyez.” before his mind went blank, he recalled. To keep things moving, he then said, “Sit down and be quiet.”
“The pressure is really off for me,” MacBride said during his remarks today. “I can’t go downhill from there.”
MacBride, who was confirmed in September, said he will focus on fighting terrorism and protecting national security as U.S. Attorney.
Although the EDVA lost out to the Southern District of New York in internal DOJ jockeying for the Khalid Shaikh Mohammed trial, MacBride said he was honored to have prosecutors from the Eastern District assist their counterparts in Manhattan in the prosecution of the alleged 9/11 attacks mastermind and four other suspected terrorists in New York.
“I will work hard everyday to continue the tremendous legacy of the Eastern District of Virginia in every way I can,” MacBride said.
Holder has now attended four U.S. Attorney investitures including ceremonies for Joyce Vance in the Northern District of Alabama, Preet Bharara in the SDNY, and B. Todd Jones in Minnesota.
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If you’re wondering what went into Attorney General Eric Holder’s decision to prosecute Khalid Sheik Mohammed and his alleged confederates in federal court, and why he settled on the Southern District of New York, The Washington Post’s Carrie Johnson has some answers.
Top prosecutors in Alexandria, Va., and Manhattan twice made their pitch to Holder in the command center in department headquarters. Holder favored New York for security reasons. According to Johnson:
In the end, the biggest factor that influenced Holder’s decision-making, according to senior Justice Department officials, turned out to be a confidential security study prepared by the U.S. Marshals Service. That agency operates behind the scenes to protect courthouses, judges and witnesses in scores of facilities across the country. The marshals concluded that the Southern District of New York — with its hardened courthouse, secure Metropolitan Correctional Center and underground transportation tunnels through which to bring defendants to and from court each day — was, hands down, the safest option.
The politics were easier, too. In New York, Holder enjoyed the support of New York Gov. David A. Paterson (D), New York Mayor Michael R. Bloomberg (I) and Police Commissioner Raymond Kelly, as well as Sen. Charles E. Schumer (D-N.Y.). But in Virginia, Rep. Frank R. Wolf (R) and Sen. James Webb (D) have opposed bringing detainees to U.S. soil.
When the decision was made, Holder called Neil MacBride, the U.S. Attorney in Alexandria, and Preet Bharara, the top prosecutor in the Southern District. MacBride pledged his support without complaint, Johnson reported.
Prosecutors from EDVA will head to New York to present evidence to a grand jury and help try the case. Holder’s national security adviser, Amy Jeffress, will decide the final composition of the trial team.
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Career prosecutor Dana Boente will retain a leadership position in the U.S. Attorney’s office for the Eastern District of Virginia, The Washington Examiner reported.
U.S. Attorney Neil MacBride, who was confirmed Sept. 15, named Dana Boente as his top deputy. Boente served as the acting head of the office after Chuck Rosenberg resigned in October 2008. Boente was also Rosenberg’s First Assistant U.S. Attorney. The EDVA, in the suburbs of Washington, became one of the premier venues for national security cases after the 9/11 attacks.
Here are some highlights from the Examiner’s interview with Boente:
Examiner: What brought you to a career in prosecuting?
Boente: When I was first getting started in my legal career I came out to Washington to work in the Department of Justice. I thought I’d work there for three or four years and then move back to the Midwest and engage in corporate law. That was 26 years ago. It wasn’t the plan I started out with, but I enjoy it.
Examiner: How does newly appointed U.S. Attorney Neil MacBride compare with your old boss, Chuck Rosenberg?
Boente: They’re both low key guys, which is as helpful in that position as it is in mine. They have relaxed personalities.
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Sen. Ron Wyden (D-Ore.) on Wednesday announced his recommendations for Oregon’s U.S. Attorney. Read the news release here.
The finalists are Josh Marquis, Amanda Marshall and Kent Robinson.
Marquis has served as the district attorney for Clatsop County since 1994. He previously was the chief deputy district attorney for Deschutes and Lincoln counties. Marquis also worked as a deputy district attorney for Lincoln and Lane counties.
Marshall is a child advocacy lawyer for the Oregon Department of Justice. She has a Facebook page promoting her candidacy here.
Robinson is the district’s acting U.S. Attorney. From 2007 until earlier this year, he was the district’s First Assistant U.S. Attorney. From 2001 through 2007, he served as the chief of the criminal division in the district.
The omission of Oregon Assistant U.S. Attorney Dwight Holton from the list came as a surprise, according to Willamette Week in Portland.
The newspaper said:
Going into the weekend, many insiders speculated that Dwight Holton, an assistant U.S. Attorney was likely to be one of three finalists. The son of a former Virginia governor and the brother-in-law of current Virginia governor and Democratic National Committee boss Tim Kaine, Holton is connected, as well as being a well-regarded prosecutor.
Wyden appointed a 13-member selection committee to make recommendations for the senators to consider. The panel also considered Clackamas County District Attorney John Foote and Benton County District Attorney John Haroldson, but their names also weren’t on the final list sent to the White House. President Barack Obama ultimately will select and nominate the U.S. Attorney.
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Attorney General Eric Holder on Monday announced nine appointees to the Attorney General’s Advisory Committee of U.S. Attorneys.
In August, Holder tapped Minnesota U.S. Attorney B. Todd Jones to chair the committee, an influential policy-making and advisory body that serves as the voice of the U.S. Attorneys at Main Justice.
U.S. Attorney Patrick Fitzgerald, of Illinois’ Northern District, served as interim chairman before Jones was confirmed. Chicago’s top prosecutor, a Republican appointee who has been recommended for a second tour of duty, will remain on the committee.
The nine new members are listed below. Click on their names for a summary of their Senate questionnaires.
- Preet Bharara, of the Southern District of New York
- Dennis Burke, of Arizona
- Jenny Durkan, of the Western District of Washington
- Paul Fishman, of New Jersey
- Neil MacBride, of the Eastern District of Virginia
- Peter Neronha, of Rhode Island
- Joyce Vance, of the Northern District of Alabama
- Channing Phillips, acting U.S attorney in the District of Columbia
- John Davis, chief of the criminal division of the federal prosecutors’ office in Alexandria, will represent the views of Assistant U.S. Attorneys.
They will each serve two-year terms.
The Senate so far has confirmed 18 of 93 U.S. Attorneys. One nominee is waiting for approval by the full Senate, and 11 more await a vote in the Senate Judiciary Committee.
Holder, in a statement, said he would rely heavily on the the AGAC as the department works to curb violent crime and gang violence, promote civil rights, police the marketplace and protect national security.
The AGAC’s other members, who were appointed during the Bush administration, include U.S. Attorney Leura Canary, of Middle District of Alabama; Rod Rosenstein, of Maryland; Brett Tolman, of Utah; and Gretchen Witt, the civil chief in the District of New Hampshire.
Regulations require only that the committee have an “appropriate” number of members.
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