Taylor Bean former CEO Allen charged by SEC with aiding TARP fraud

By Caroline Salls

Pittsburgh, June 21 - Taylor, Bean & Whitaker Mortgage Corp. former chief executive officer Paul R. Allen has been charged by the Securities and Exchange Commission with aiding and abetting the efforts of former Taylor Bean chairman Lee B. Farkas to defraud the U.S. Treasury's Troubled Asset Relief Program (TARP), according to a news release.

According to the SEC's complaint, filed in the U.S. District Court for the Eastern District of Virginia, Farkas, with Allen's "substantial assistance," was responsible for a bogus equity investment that caused Colonial Bank to misrepresent that it had satisfied a prerequisite for TARP funds qualification.

The SEC said Colonial Bank parent Colonial BancGroup, Inc.'s stock price jumped 54% in the remaining two hours of trading after it issued a press release announcing that it had obtained preliminary approval to receive $550 million in TARP funds.

This represented Colonial BancGroup's largest one-day stock price increase since 1983.

The SEC said its complaint alleges that Farkas falsely told BancGroup that a foreign-held investment bank had committed to financing Taylor Bean's equity investment in Colonial Bank.

Farkas also issued a press release on behalf of Taylor Bean, announcing that the company had secured the necessary financing for Colonial BancGroup, according to Tuesday's release.

However, the agency said Farkas never secured financing or enough investors to fund the capital infusion.

When Colonial BancGroup and Taylor Bean later mutually announced the termination of their stock purchase agreement, essentially signaling the end of Colonial Bank's pursuit of TARP funds, the SEC said Colonial BancGroup's stock declined 20%.

According to the release, Allen helped Farkas make these false statements.

The SEC's complaint against Allen charges him with aiding and abetting violations of the antifraud provisions of the Securities Exchange Act of 1934.

Allen has consented to a permanent injunction from his violation of the Exchange Act.

The preliminary judgment, under which the SEC's requests for financial penalties against Allen remain pending, was entered by the judge Leonie M. Brinkema on Friday.

The SEC said its investigation is ongoing.

Taylor Bean, an Ocala, Fla.-based mortgage banker, filed for bankruptcy on Aug. 24, 2009 in the U.S. Bankruptcy Court for the Middle District of Florida. Its Chapter 11 case number is 09-07047.

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