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SEC Accuses Mortgage Company of Scamming Colonial Bank and TARP

SEC Accuses Mortgage Company of Scamming Colonial Bank and TARP

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Published by: 83jjmack on Feb 24, 2011
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03/30/2011

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."
FILED
UNITED
STATES DISTRICT COURT
FOR THE
EASTERN DISTRICT
OF
VIRGINIA
ALEXANDRIA
DIVISION
2fJ11
FEB

 
A
q:
I0
CLERK
US
DISTRICT
COUi'!
ALEXANDRIA.
VIRGINIA
SECURITIES
AND
EXCHANGECOMMISSION,
Plaintiff,Civil Action File No.
v.
DESIREE E.BROWN,
Defendant.
COMPLAINT
FOR
INJUNCTIVE
AND
OTHER RELIEF
Plaintiff, Securities and Exchange Commission ("Commission"), files this Complaint andalleges as follows:
SUMMARY·
1.
From approximatelY,March 2002 through August 2009, Defendant Desiree
E.
Brown ("Brown"), together with Lee
R
-J:arkas ("Farkas"), engaged in a pattern
of
fraudulentconduct for the purpose
of
selling at least $1.5 billion
of
fictiti,9uS and impaired residentialmortgage loans from Farkas' company, Taylor, Bean and Whitaker Mortgage Corp. ("TBW") toColonial Bank, and for Colonial Bank, and its publicly traded parent company, The ColonialBancGroup, Inc. ("BancGroup"), to falsely record these fictitious and impaired mortgage loansas high quality assets.
2.
Defendant Brown continued this pattern
of
fraudulent conduct by, along withFarkas, attempting to defraud the U.S. Department
ofthe
Treasury's Troubled Asset ReliefProgram ("TARP"). Farkas, with the direct assistance
of
Defendant Brown, represented to
-1-
 
BancGroup and to the public in a series
of
press releases that
TBW
had secured a $300 millionequity investment in BancGroup that would allow BancGroup and its wholly owned subsidiary,Colonial Bank, to qualify for approximately $550 million in TARP funds (the "CapitalInfusion"). The Capital Infusion, however, was a sham orchestrated by Farkas with the help
of
Defendant Brown. Contrary to the representations to BancGroup and to the investing publicfacilitated by Farkas and Defendant Brown,
TBW
had never secured financing
or
sufficientinvestors to fund the transaction.3. Through her conduct, Defendant Brown has engaged, and unless restrained andenjoined by this Court, will continue to engage in acts and practices that constitute and willconstitute violations
of
Rule 13b2-1
of
the Securities Exchange Act
of
1934 ("Exchange Act")[17 C.F.R. § 240.13b2-1]. Defendant Brown has further engaged, and unless restrained andenjoined by this Court, will continue to engage in acts and practices that constitute and willconstitute aiding and abetting violations,
of
Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B)and 13(b)(5)
of
the Exchange Act [15 U.S.C.
§§
78j(b), 78m(a), 78m(b)(2)(A), 78m(b)(2)(B)and 78m(b)(5)] and Rules 10b-5, 12b-20, 13a-l, 13a-ll and 13a-13 [17 C.F.R.
§§
240.1
Ob-5,
240. 12b-20, 240. 13a-l, 240. 13a-ll and 240. 13a-13] thereunder.
JURISDICTION
AND
VENUE
4. The Commission brings this action pursuant to Sections 21(d) and 21(e)
of
theExchange
Act
[15 U.S.C.
§§
78u(d) and 78u(e)], to enjoin Defendant Brown from engaging in thetransactions, acts, practices, and courses
of
business alleged in this complaint, and transactions, acts,practices, and courses
of
business
of
similar purport
and
object, for disgorgement with prejudgmentinterest thereon, civil penalties and for other relief.
-2-
 
5.
This Court has jurisdiction over this action pursuant to Sections
21
(d),
21
(e), and27
of
the Exchange Act [15 U.S.C.
§§
78u(d), 78u(e) and 78aa].6. Defendant Brown directly and indirectly, made use
of
the mails and the meansand instrumentalities
of
interstate commerce in connection with the transactions, acts, practices,and courses
of
business alleged in this complaint.
7.
Certain
of
the transactions, acts, practices, and courses
of
business constitutingviolations
ofthe
Exchange Act occurred in the Eastern District
of
Virginia. The fraudulentconduct
of
Defendant Brown directly caused BancGroup to transmit and to file multiple falseand misleading Forms 10-K,
lO-Q
and 8-K
to
the Commission's electronic data gathering,analysis and retrieval system ("EDGAR"), the servers
of
which are physically located within theEastern District
of
Virginia. Certain persons who purchased securities issued by BancGroupwhile it filed misleading Forms 10-K,
lO-Q
and 8-K with the Commission as a direct result
of
Defendant Brown's misconduct are residents
of
the Eastern District
of
Virginia.
8.
Defendant Brown, unless restrained and enjoined by this Court, will continue toengage in the transactions, acts, practices, and courses
of
business alleged in this complaint, andin transactions, acts, practices, and courses
of
business
of
similar purport and object.DEFENDANT
9.
Desiree E.
Brown
is
45
years
of
age and is a resident
of
Ocala, Florida. Brown isthe former treasurer ofTBW.
RELATED PERSON
AND
ENTITIES
10.
LeeB.
Farkas
is
58
years
of
ageandisaresident
of
Ocala,Florida. UntilAugust2009, Farkas was the chairman and majority owner ofTBW.
-3-

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