March 20, 2012 / 3:38 PM / 7 years ago

Ex-CFO pleads guilty in mortgage fraud case

ALEXANDRIA, Virginia (Reuters) - Taylor, Bean & Whitaker Mortgage Corp’s former chief financial officer pleaded guilty on Tuesday to charges he helped mislead investors and cover up shortfalls that led to the collapse of one of the largest mortgage companies during the recent U.S. financial crisis.

Delton de Armas, 41 of Carrollton, Texas, pleaded guilty to one count of conspiracy to commit bank and wire fraud and one count of making false statements, charges that each carry a maximum five-year prison term.

He admitted to helping inflate TBW’s balance sheet and helping the firm provide false financial statements to the federal loan enterprise known as Ginnie Mae, according to papers filed in federal court in Virginia.

He failed to intervene and report growing shortfalls in one of TBW’s primary funding mechanisms, Ocala Funding, which had two major investors: Deutsche Bank AG and BNP Paribas SA, the court documents said.

“I regret that anybody was hurt and that I didn’t speak up more,” de Armas said in a barely audible voice during his plea hearing in federal court. Sentencing was set for June 15.

De Armas worked under the firm’s former chairman, Lee Farkas, who last year was sentenced to 30 years in prison after being convicted on 14 counts of conspiracy, bank, securities and wire fraud that brought down the firm and one of the top U.S. banks, Colonial Bank.

“As CFO, Mr. de Armas could have put a stop to the fraud the moment he discovered it. Instead, the hole in Ocala Funding grew to $1.5 billion on his watch, and as it grew, so did his lies to investors and the government,” U.S. Attorney Neil MacBride said in a statement.

The scheme at TBW, which ran from 2005 to 2009, involved hiding massive losses and misappropriating money from Ocala Funding. They hid the shortfalls by shuffling money between bank accounts and sold mortgages that either didn’t exist, had already been sold or were worthless.

Colonial Bank’s collapse was the sixth-largest bank failure and the third largest during the financial crisis. Scores of workers lost their jobs from the collapse of both firms.

Several other senior executives from Taylor, Bean & Whitaker and Colonial Bank have already pleaded guilty in the sprawling case.

The case is USA v. Armas in U.S. District Court for the Eastern District of Virginia, No. 12-cr-96.

Reporting By Jeremy Pelofsky, editing by Dave Zimmerman

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