30,000 Whistleblowers Report Suspected Bank Fraud To Feds

The government agency established to be the watchdog over the Troubled Asset Relief Program (TARP) has been keeping busy.  The financial crisis of 2008 resulted in the disbursement of over $400 billion of TARP funds which requires government oversight.

In order to prevent waste, fraud and abuse of taxpayer funded TARP disbursements, Congress created the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).  The official mission of SIGTARP is to advance economic stability through the effective management of TARP money and to aggressively enforce the law against those wasting, stealing or abusing TARP funds.

SIGTARP, in its latest quarterly report to Congress noted that the TARP program is scheduled to last until 2017.  The taxpayers are still owed over $132 billion in TARP money and the U.S. Treasury is still trying to unwind and recoup its investment in 458 institutions.  In addition, the Treasury still has authorization to spend an additional $51 billion in TARP funds.

Amazingly enough, the program established to provide banks and other institutions with money to keep them from going under has attracted criminals seeking to defraud the TARP program.  FBI Director Robert Mueller’s prediction that the “next wave of financial fraud cases” would be related to the TARP bailout money has unfortunately turned out to be accurate.

SIGTARP’s latest report highlights the most successful actions taken against criminals seeking to steal from the TARP program.

  • The most significant prosecution to date arising out of the financial crisis resulted in a prison sentence of 30 years for Lee Farkas, former chairman of Taylor, Bean & Whitaker (“TBW”); prison sentences ranging from 3 months to 8 years for six co-conspirators at TBW and TARP-approved Colonial Bank; and court-ordered restitution of $3.5 billion, for an 8-year $2.9 billion fraud scheme that led to the failure of TBW and Colonial
  • A guilty plea by Mark Conner, former president of TARP applicant FirstCity Bank, for a multimillion dollar-bank fraud that took place in the years prior to the bank’s seizure by regulators – Conner faces a sentence of up to 12 years in prison
  • Prison sentences of 5 years, and 21 months, respectively, for two executives of failed TARP applicant Omni Bank for fraud that involved falsifying the bank’s books and records, and a 14-year prison sentence for an individual connected to the bank fraud
  • Prison sentences of 5 years, and 2 ½ years, respectively, for two executives at TARP applicant Orion Bank for fraud that involved falsifying the bank’s books and records and misleading regulators
  • Prison sentences of 11 years, and 5 years, respectively, for two executives of Mount Vernon Money Center who defrauded investors, including TARP recipient banks


In addition, SIGTARP recently announced the guilty plea by the perpetrator of a massive $41 million bank fraud that resulted in the failure of Bank of the Commonwealth.  At the end of last year, SIGTARP was working on over 150 active criminal and civil investigations.

After all of the “Too Big To Fail Banks” repaid their TARP loans to the U.S. Treasury, the general public perception was that the TARP program had been wound down.  SIGTARP, however, reports that the TARP program is still very active.  The U.S. Treasury still owns 32% of General Motors, 77% of giant insurance company AIG and holds preferred stock in 371 (mostly small) community banks.

The government has apparently gotten its message across to the American public about fraud in the TARP program.  SIGTARP’s Hotline, setup to allow the public to report information on suspected fraud related to TARP, has received almost 30,000 calls from wannabe whistleblowers.  Callers call report information anonymously at 877-SIG-2009 or online at www.sigtarp.gov.

SIGTARP has had a busy year during 2012 with 16 press releases announcing the conviction of numerous criminals for bank fraud, mortgage fraud and other serious violations.

By law, SIGTARP is supposed to wind down after the Government has sold or transferred all assets under the TARP program.  In the meantime, SIGTARP has grown to 168 employees at December 31, 2011 and the operating budget for FY 2012 is $45.6 million, up from $38.2 million in the prior year.   Prediction – expect SIGTARP to be around for a very long time regardless of when the TARP program winds down.  Who was it that said “a government bureau is the nearest thing to eternal life we’ll ever see on this earth?”

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