Former Mortgage Co. CEO Pleads Guilty In $1.5 Billion Fraud

By Christopher Maag

The CEO of a mortgage company pleaded guilty last week to two counts of fraud for trying to steal $1.5 billion from investors and the federal government. Paul Allen, the former chief executive officer at Taylor, Bean & Whitaker Mortgage Corp. in Ocala Fla., faces up to 10 years in prison, according to a press release by the U.S. Department of Justice.

Taylor, Bean & Whitaker (TCB) set up a separate company called Ocala Funding to raise money from investors and used it to buy mortgages written by TCB, according to the press release. The problem was that Ocala Funding promised more assets to investors than the company actually owned.

At its height, Ocala was $1.5 billion behind. Allen and other TCB leaders called it the “hole.” To disguise that hole, the company resold the same mortgages multiple times to different investors, according to the release. Freddie Mac, Colonial Bank of Montgomery, Ala., and investors in Ocala Funding all believed they had sole ownership in thousands of the same mortgage loans.

[Related: Almost All TARP Funds Have Been Paid Back]

To make matters even worse, Allen approached the Troubled Assets Relief Program (TARP) program to request $553 million in taxpayer money to try to pay off some of the hole. In court, Allen admitted that he lied in his application to the Treasury Department about the financial health of his institution. Luckily he failed to get any TARP money, according to the Justice Department.

Allen, 55, pleaded guilty to conspiring to commit bank fraud and wire fraud, and making false statements. He is scheduled to be sentenced on July 21 in U.S. District Court of Eastern Virginia.

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