Delton de Armas was sentenced Friday by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. De Armas, 41, of Carrollton, Texas, pleaded guilty in March to one count of conspiracy to commit bank and wire fraud and one count of making false statements, according to the statement.
The former CFO joined TBW in 2000 and reported directly to its chairman, Lee Bentley Farkas, and later to its CEO, Paul Allen. He previously admitted in court that from 2005 through August 2009, he and other co-conspirators took part in a scheme to defraud financial institutions that had invested in Ocala Funding, a wholly-owned lending facility.
Ocala Funding obtained funds for mortgage lending for TBW from the sale of asset-backed commercial paper to financial institutions. The facility was managed by TBW and had no employees of its own.
According to court records, shortly after Ocala Funding was established, de Armas learned there were inadequate assets backing its commercial paper, a deficiency dubbed as a “hole”.
De Armas was aware that the hole grew to more than $700 million and learned from the CEO that the deficiency was more than $1.5 billion when TBW fell.
De Armas admitted he was aware that an employee under him falsified Ocala Funding collateral reports and periodically sent the falsified reports to financial institution investors in Ocala Funding and to other third parties to cover up the deficiency.
De Armas acknowledged that he and the CEO also deceived investors by providing them with a false explanation for the hole in Ocala Funding.
He also admitted his awareness of falsified financial statements that were later provided to Ginnie Mae and Freddie Mac for their determination to renew TBW’s authority to sell and service securities issued by them.
In addition, de Armas admitted in court to aiding and abetting false statements in a letter the CEO sent to the HUD, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009.
De Armas reviewed and edited the letter, aware of the material omission it contained.
The letter failed to reveal the true reason for the delay in submitting financial data. The delay was caused by concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank and its request that TBW retain a law firm to conduct an internal investigation.
Instead, the letter falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.
On June 30, 2011, Judge Brinkema sentenced Farkas to 30 years in prison, and six others have pleaded guilty for their involvement in the fraud scheme.
Allen was sentenced to 40 months in prison; Raymond Bowman, former president of TBW, was sentenced to 30 months in prison; Desiree Brown, former treasurer of TBW, was sentenced to six years in prison; Catherine Kissick, former SVP of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD), was sentenced to eight years in prison; Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD, was sentenced to three months in prison; and Sean Ragland, a former senior financial analyst at TBW, was sentenced to three months in prison.
This case was investigated by SIGTARP, FBI’s Washington Field Office, FDICOIG, HUDOIG, FHFAOIG and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.
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