WASHINGTON (Reuters) - A former bank executive who served as the go-between for Taylor, Bean & Whitaker Mortgage Corp, which collapsed from a $2.9 billion fraud scheme, was sentenced on Friday to eight years in federal prison.
Catherine Kissick, 50, who was the head of Colonial Bank's mortgage warehouse lending division, pleaded guilty in March to one count of conspiracy to commit bank, securities and wire fraud. She received the longest prison sentence so far related to the TBW investigation.
Kissick was the primary contact point for TBW's chairman, Lee Farkas, and helped devise plans that enabled the mortgage institution to sell loans that did not exist or had already been sold to other banks or investors.
Colonial Bank ended up advancing money to TBW for the loans. They came up with the scheme to help address constant overdrafts by TBW which resulted from massive losses by the firm, according to prosecutors.
While Kissick knew that their actions were fraudulent, she testified they continued out of fear that it would be detected. However, she sought to secure additional collateral from TBW in a bid to minimize the bank's exposure, prosecutors said.
"She was fully aware that her actions were fraudulent and she worked closely with Farkas in carrying out the fraud scheme," prosecutors said in their sentencing recommendation to District Judge Leonie Brinkema.
She had faced up to 30 years in prison. Prosecutors had recommended that she be sentenced to 11 years in prison.
Also sentenced was one of Kissick's assistants, Teresa Kelly, who worked at Colonial Bank as an operations supervisor and processed many of the transactions of fake mortgage sales. She was sentenced to three months in prison, followed by nine months of house arrest.
Colonial Bank, a unit of Colonial BancGroup Inc
As losses mounted at TBW, the firm tried to drum up capital to help Colonial Bank win $553 million in funding from the federal bank bailout program known as the Troubled Asset Relief Program, prosecutors said. No money was disbursed.
The case represents a big victory for the Obama administration which has been under pressure to prosecute senior executives who were responsible for the U.S. housing market collapse, which touched off a deep recession.
Farkas is due to be sentenced on June 27, though the government has not yet said what they plan to recommend.
Last week, two of his key lieutenants were given their prison sentences. Former TBW treasurer Desiree Brown was sentenced to six years in prison and former TBW president Raymond Bowman to 30 months.
(Reporting by Jeremy Pelofsky, editing by Dave Zimmerman)