Ex-TBW CEO guilty in $1.5 billion scheme

RICHMOND, Va., April 2 (UPI) -- The former chief executive of Taylor, Bean & Whitaker pleaded guilty in Richmond, Va., Friday to his role in a $1.5 billion mortgage fraud scheme.

Paul Allen, the former chief executive officer at the now-shuttered mortgage loan firm admitted making false statements and conspiring to commit bank and wire fraud as part of the scheme that contributed to the failure of TBW, the Justice Department said in a release.

Allen, 55, of Oakton, Va., faces up to five years in prison for each count when he is sentenced June 21.

Allen admitted in court that from 2005 through most of 2009, he and other co-conspirators schemed to defraud financial institutions that had invested in a wholly owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas, and used the money to purchase TBW mortgages. The operation was managed by TBW and had no employees of its own.

Authorities say shortly after Ocala Funding was created, Allen learned there were not enough assets backing its commercial paper and he told a co-defendant to produce reports that concealed the shortfall.

Five other individuals also have pleaded guilty in the case.