PENDING CRIMINAL DIVISION CASES

United States v. Delton de Armas
Court Docket Number: 1:11-cr-88-LMB

The case is assigned to the Honorable Leonie M. Brinkema, United States District Court Judge for the Eastern District of Virginia, United States Courthouse, 400 Courthouse Square, Alexandria, Virginia 22314.

On June 15, 2012, Delton de Armas, a former chief financial officer (CFO) of Taylor, Bean & Whitaker Mortgage Corporation (TBW), was sentenced by U.S. District Judge Leonie M. Brinkema to 60 months in prison for his role in a more than $2.9 billion fraud scheme that contributed to the failure of TBW.   De Armas pleaded guilty to a criminal information charging him with one count of conspiracy to commit bank fraud and wire fraud (Count 1: 18 U.S.C. § 371) and one count of making false statements (Count 2: 18 U.S.C. § 1001). 

According to court documents, de Armas joined TBW in 2000 as its CFO and reported directly to its chairman, Lee Bentley Farkas, and later to its CEO, Paul Allen. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding. Ocala Funding obtained funds for mortgage lending for TBW from the sale of asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas. The facility was managed by TBW and had no employees of its own.

According to court records, shortly after Ocala Funding was established, de Armas admitted that he learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. De Armas admitted that he knew that the hole grew over time to more than $700 million. According to plea documents, he learned from the CEO that the hole was more than $1.5 billion at the time of TBW’s collapse. De Armas admitted he was aware that, in an effort to cover up the hole and mislead investors, a subordinate who reported to him had falsified Ocala Funding collateral reports and periodically sent the falsified reports to financial institution investors in Ocala Funding and to other third parties. According to court documents, De Armas acknowledged that he and the CEO also deceived investors by providing them with a false explanation for the hole in Ocala Funding.

De Armas also admitted in court that he directed a subordinate to inflate an account receivable balance for loan participations in TBW’s financial statements. De Armas acknowledged that he knew that the falsified financial statements were subsequently provided to Ginnie Mae and Freddie Mac for their determination on the renewal of TBW’s authority to sell and service securities issued by them.

In addition, de Armas admitted in court to aiding and abetting false statements in a letter the CEO sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. De Armas reviewed and edited the letter, knowing it contained material omissions. According to court documents, the letter omitted that the delay in submitting the financial data was caused by concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank and its request that TBW retain a law firm to conduct an internal investigation. Instead, the letter falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.

Related Cases: In related cases, in April 2011, Lee Bentley Farkas, the chairman of TBW, was found guilty by a jury of 14 counts of conspiracy, bank, securities and wire fraud. In June 2011, Farkas was sentenced to 30 years in prison. In addition, six individuals have pleaded guilty for their roles in the fraud scheme, including: Paul Allen, former chief executive officer of TBW, who was sentenced to 40 months in prison; Raymond Bowman, former president of TBW, who was sentenced to 30 months in prison; Desiree Brown, former treasurer of TBW, who was sentenced to six years in prison; Catherine Kissick, former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD), who was sentenced to eight years in prison; Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD, who was sentenced to three months in prison; and Sean Ragland, a former senior financial analyst at TBW, who was sentenced to three months in prison.

If you have any questions, please call Pam Washington (888) 549-3945 or email her at victimassistance.fraud@usdoj.gov.

Plea Agreement

Information and Statement of Facts

Updated June 15, 2015