Mortgage Fraud: Farkas Wasn't the First
On Weds, federal authorities stunned us with the arrest of mortgage lender Lee Farkas, charged with masterminding a $1.9 billion fraud scheme tied to the government's Troubled Asset Relief Program (TARP) funds.
And then on Thurs, even while the FBI was releasing its latest mortgage fraud report, the President's interagency Financial Fraud Enforcement Task Force revealed that since March 1, Operation Stolen Dreams has arrested 485 people for their involvement in mortgage fraud losses exceeding $2.3 billion.
Remember Charles Antonucci Sr., former CEO of the former Park Avenue Bank, who in March of 2009 famously withdrew his bank's application for TARP funds?
Lost in the shuffle over the past week or so was disturbing news about a former bank executive who's in serious trouble over alleged misdeeds.
Remember Charles Antonucci Sr., former CEO of the former Park Avenue Bank, who in March of 2009 famously withdrew his bank's application for TARP funds? "I don't need TARP money," Antonucci told me at the time. "I don't necessarily want TARP money, we are a strong bank, and management is committed to putting capital in as it is needed."
Well, almost exactly one year later, not only did Park Avenue Bank fail, but Antonucci himself was arrested and charged with - guess what? - attempting to defraud TARP of roughly $11 million. That makes Antonucci the first bank executive accused of TARP-related fraud. In all, he was charged with 10 counts of fraud, bribery and other crimes related to his management of Park Avenue Bank. "There are a lot of issues with the TARP funding and the perception," Antonucci told me in 2009. "Nobody really knows what the rules are going to be in terms of those who take and utilize the TARP money."
'... those who take and utilize TARP money,' indeed.
The story doesn't end there. Earlier this month, the Oklahoma Insurance Department revealed in a court filing that it is investigating Antonucci's role in the failed Providence Property & Casualty Insurance Co. Antonucci is alleged to have used Providence's own money to finance his $37.5 million acquisition of the company. In news accounts, Oklahoma's Insurance Commissioner was quoted as saying "Civil and criminal actions are a real possibility."
One more quote from Antonucci, and then I'll quit with the irony. He told me when he withdrew Park Avenue Bank's TARP application that he was concerned about public perception. "There is market perception that if you take TARP money, that you are now a bad bank, which is a perception that nobody wants whether you are or you aren't," he said. "Nobody needs that perception in a marketplace where everybody is concerned about safety."
And now where are we? In a marketplace where the public has just been smacked in the face with the realities of the mortgage fraud threat. Once again, banking's reputation - its trust - absorbs a stunning body blow, and no institution needs that perception in a marketplace where everybody is concerned about safety.
This is a story that's going to have some legs. Clearly, the feds are attempting to crack down on one of the quieter forms of banking fraud. (I mean, seriously, with all eyes on ATM skimming and ACH fraud, who's been watching the watchmen in terms of mortgage fraud?) And the public is going to demand answers to tough questions. They're going to want to know exactly how Lee Farkas went from being chairman of Taylor, Bean & Whitaker Mortgage Corp., one of the nation's top private mortgage home lenders, to wearing an orange-striped jumpsuit in U.S. District Court.
I've talked to several mortgage fraud experts over the past few months, and the stories have been consistently frightening about what's been overlooked at banking institutions:
"There are really no new trends in mortgage fraud," expert Cindi Dixon told me a couple of months back. "It is kind of the same old thing, and you know it really surprises me that given the market and given the circumstances that I think are undeniable for all of us as this point, that implementing basic policies and procedures and enforcing them -- it actually does work."
And yet too often the people, policies and technologies are failing.
This week's events aren't the last word on mortgage fraud - not by a long shot. But here's hoping they get enough attention to ignite the start of a meaningful dialogue and movement toward reversing this troubling trend.