PENDING CRIMINAL DIVISION CASES

United States v. Teresa Kelly
Court Docket Number: 1:11-cr-119-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 17, 2011, Teresa Kelly, a former operations supervisor at Colonial Bank's Mortgage Warehouse Lending Division (MWLD), in Orlando, Florida, was sentenced to three months in prison followed by three years of supervised release, including nine months of home confinement, on her March 16, 2011 guilty plea to one count of conspiracy to commit bank, wire and securities fraud (Count 1: 18 U.S.C. § 371) for her role in a fraudulent scheme to misappropriate funds from banks that loaned funds to Taylor, Bean & Whitaker (TBW) for its mortgage operations. In a related action, on March 16, 2011, the U.S. Securities and Exchange Commission (SEC) filed an enforcement action against Brown in the Eastern District of Virginia.

In pleading, Kelly admitted that from 2002 through August 2009, she and her co-conspirators at Colonial Bank and TBW engaged in a scheme to defraud various entities and individuals, including Colonial Bank, a federally insured bank; Colonial BancGroup Inc.; and the investing public. Kelly admitted that she knowingly and intentionally placed Colonial Bank and Colonial BancGroup at significant risk by causing them to purchase more than $400 million in assets that had no value. The fraud scheme caused Colonial Bank and Colonial BancGroup to purchase tens of millions of dollars of worthless assets, caused Colonial BancGroup to report false information in its financial statements, and artificially inflated the value of TBW's mortgage servicing rights. Court documents state that TBW began running overdrafts in its master bank account at Colonial Bank because of TBW's inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. In or about 2002, Kelly, former chairman of TBW Lee Bentley Farkas and co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious "sales" of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed "Plan B." The conspirators accomplished Plan B by selling Colonial Bank mortgage loans that did not exist or that TBW had already committed or sold to other third-party investors.

As Plan B evolved, co-conspirators at TBW also caused TBW to engage in sham sales of groups of mortgage loans, known as "pools," to Colonial Bank that other entities already owned. As a result, false information was entered on Colonial Bank's books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans, when, in fact, the pools had no value and could not be securitized or sold. According to court documents, Kelly also admitted that she and her co-conspirators took steps to hide the fraud scheme from Colonial Bank's and Colonial BancGroup's senior management, auditors and regulators, and Colonial BancGroup's shareholders, including by providing materially false information that significantly overstated assets held in the MWLD portfolio. Kelly knew that these actions caused materially false financial data to be reported to Colonial BancGroup and incorporated in its publicly filed statements.

In August 2009, the Alabama State Banking Department, Colonial Bank's regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.

Related Cases: In a related case, United States v. Lee Bentley Farkas,  defendant Farkas was convicted after a jury trial in April 2011 on one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; four counts of wire fraud; and three counts of securities fraud.  Farkas was remanded into custody after the trial and is scheduled to be sentenced on June 30, 2011 at 10:30 a.m. in Courtroom 600 before Judge Brinkema.  In United States v. Raymond Bowman (Court Docket No. 1:11-cr-118-LMB), Raymond Bowman previously pleaded guilty on March 14, 2011, to one count of conspiracy to commit bank, wire and securities fraud (Count 1: 18 U.S.C. § 371) and one count of false statements in connection with a fraudulent scheme to misappropriate funds from banks that loaned TBW funds for its mortgage operations. On June 10, 2011, defendant Bowman was sentenced to 30 months in prison on his March 2011 guilty plea. Also, in two other related cases, United States v. Desiree Brown (Court Docket No. 1:11-cr-84-LMB), and United States v. Catherine Kissick (Court Docket No. 1:11-cr-88-LMB), Desiree Brown, the former TBW treasurer, and Catherine Kissick, a former senior vice president of Colonial Bank and head of Colonial Bank's Mortgage Warehouse Lending Division, each pleaded guilty to separate criminal informations charging them with one count of conspiracy to commit bank, wire and securities fraud for their roles in the fraud scheme that contributed to the failure of Colonial Bank and TBW. On June 10, 2011, defendant Brown was sentenced to 72 months in prison on her February 2011 guilty plea and on June 17, 2011, defendant Kissick was sentenced to eight years in prison followed by three years of supervised release on her March 2011 guilty plea.

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

Government's Filing with Respect to Restitution

Plea Agreement

Criminal Information and Statement of Facts

Updated June 15, 2015