The Colonial Bank

Colonial Bank, formerly a subsidiary of Colonial BancGroup, was headquartered in Montgomery, Alabama. Colonial Bank had 346 branches in the states of Alabama, Georgia, Florida, Nevada and Texas.

Colonial's assets had grown from $166 million in 1981 to $26 billion. Colonial expanded from its base of Alabama to fast growing regional markets such as Florida, Georgia, Texas, and Nevada. Colonial Bank was the fifth largest commercial bank in Florida and 27th largest commercial bank in the USA. Colonial Bank was frequently the target of rumors that it would be acquired by a larger bank.

The bank ran into problems after it was revealed that it had bought over $1 billion in mortgages from Taylor, Bean & Whitaker that Taylor Bean did not own in one of the biggest fraud cases in history. The CEO of Taylor, Bean & Whitaker, Lee Farkas, was put on trial and found guilty of fraud. Bobby Lowder, the CEO of Colonial Bank, was investigated and was not involved with the fraud.

Between 2002 and 2009, Catherine Kissick, former senior vice president of Colonial Bank and head of Colonial Bank's Mortgage Warehouse Lending Division, and her co-conspirators, including former Taylor, Bean & Whitaker Chairman Lee Farkas, engaged in a scheme to defraud various entities and individuals, including Colonial Bank, Colonial BancGroup, Taylor, Bean & Whitaker, the Troubled Asset Relief Program, and the investing public.

According to court documents, Taylor, Bean & Whitaker began running overdrafts in its master bank account at Colonial Bank. Starting in 2002, Kissick, Farkas and their co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one Taylor, Bean & Whitaker account with excess in another, and later through the fictitious "sales" of mortgage loans to Colonial Bank, a fraud the conspirators dubbed "Plan B." The conspirators accomplished "Plan B" by selling Colonial Bank mortgage loans that did not exist or that Taylor, Bean & Whitaker had already committed or sold to other third party investors.

Kissick admitted she knew and understood she and her co-conspirators had caused Colonial Bank to pay Taylor, Bean & Whitaker for assets that were worthless to the bank. As a result, false information was entered on Colonial Bank's books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans when in fact the pools had no value and could not be securitized or sold.