Former Colonial Bank Exec Admits Role in Fraud Scheme

April 05, 2011

Hundred Dollar BillsCatherine Kissick, former senior vice president at Colonial Bank, pleaded guilty to a conspiracy that defrauded about $970 million from investors and the government. She faces up to 30 years in prison for her role in the fraudulent scheme.

Kissick admitted to committing bank, wire and securities fraud that resulted in the 2009 bankruptcy of both the bank and Taylor Bean, which was once the 12th largest mortgage lender in the U.S. The collapse of Colonial marked the sixth largest bank failure in U.S. history.

Court documents allege that Taylor Bean began running overdrafts on its Colonial bank account in an effort to meet operating expenses starting in 2002. Kissick allegedly helped cover up Taylor Bean’s overdrafts by transferring money to and from other accounts. Within one year, Taylor Bean’s overdrafts amassed to tens of millions of dollars. Kissick confessed that she caused Colonial to buy more than $400 million of worthless or fictitious mortgages from Taylor Bean.

In 2008, the fraudulent scheme grew with Taylor Bean’s operating expenses.  Kissick and Taylor Bean’s CEO, Lee Farkas, along with other conspirators, tried to obtain $570 million worth of funding through TARP (the government’s Troubled Assets Relief Program). Kissick admitted to instructing Colonial employees to remove records to “evade subpoenas for documents” from TARP officials. According to the Justice Department, the application for the TARP funding also included false information and irregularities, and the application eventually did not get approved.

According to court documents, Kissick “did not personally receive funds paid out by Colonial … to [Taylor Bean].” Even so, the harm she apparently helped cause is monumental.  As Farkas goes on trial in April, we can expect to hear more details regarding another sad conspiracy arising out of the county’s financial crisis.

Sources:

Former Alabama Bank Exec Pleads Guilty to Fraud

Photo Credit: yomanimus


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