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The former chief executive officer of one of the largest private mortgage companies in the country was sentenced Tuesday in federal district court in Alexandria to 40 months in prison for his role in a $2.9 billion bank fraud scheme, the Justice Department said. Paul Allen, former chief executive officer of Taylor, Bean & Whitaker Mortgage Corp., pleaded guilty in April in U.S. District Court for the Eastern District of Virginia to a two-count information charging him with making false statements and conspiracy to commit bank and wire fraud. Allen, 55, joined TBW in late 2003. The company collapsed in 2009. He agreed to appear before the Federal Housing Finance Agency, before his sentencing this week, to “assist the government in its understanding of and efforts in preventing mortgage fraud in the future,” court records show. Lawyers for Allen, Stephen Graeff and Thomas Berger of Vienna, Va.’s Carr, Morris & Graeff, said in court papers filed this month that although Allen was the chief executive officer, “his title far exceeded his operational control as he was repeatedly denied access to critical information on the company’s financial transactions and overall financial health.” Allen’s attorneys blamed others–including Lee Farkas, the company’s former chairman–for initiating the fraud conspiracy. Farkas was convicted in April on 14 counts of fraud for his role in the scheme. His sentencing is scheduled for June 27. Several other co-conspirators have pleaded guilty and received prison sentences. “As TBW’s chief executive officer, Mr. Allen served as an accomplice to Lee Farkas and his massive fraud scheme,” Assistant Attorney General Lanny Breuer said in a statement Tuesday. “He concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion. Today’s sentence sends a strong message that corporate fraud by senior executives will not be tolerated.” Breuer also said the prosecution of Allen “demonstrates that substantial assistance in the government’s investigation and prosecution of corporate fraud will be taken into account at sentencing.” Justice Department Fraud Section Deputy Chief Patrick Stokes and trial attorney Robert Zink prosecuted the case against Allen with assistant U.S. attorneys Charles Connolly and Paul Nathanson. Prosecutors sought a six-year sentence for Allen. Allen and a co-conspirator, Sean Ragland, a former senior financial analyst at TBW, distributed documents to investors in Ocala Funding LLC that misrepresented the financial condition of the facility, DOJ said. TBW, based in Ocala, owned Ocala Funding. Ragland was sentenced Tuesday to three months in prison on a conspiracy charge. Prosecutors said TBW began running overdrafts in an account at Colonial Bank stemming from the company’s inability to meet payroll expenses and servicing payments owed to third-party purchasers of loans and mortgage-backed securities. The Justice Department said Farkas and others in 2002 began a series of actions to cover up the overdrafts. Allen’s lawyers said Allen has already settled regulatory allegations and actions brought against him by the Office of Thrift Supervision, the Securities and Exchange Commission and the Department of Housing and Urban Development. “The cumulative effect of these actions will preclude Paul Allen from being employed in or acting as a consultant or advisor in the mortgage or related financial industries that have comprised his life’s work for over thirty years,” Allen’s attorneys said. “The financial aspect of this loss, as well as the loss of his reputation and professional standing, are profound and immeasurable.” Mike Scarcella can be contacted at [email protected] .

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