A $1.75 billion federal lawsuit filed on behalf of investors of a former subsidiary of failed Taylor, Bean & Whitaker Mortgage Corp. has been dismissed.
In October 2010, Bank of America, N.A., acting as trustee on behalf of Ocala Funding LLC, filed a complaint in U.S. District Court for the District of Columbia against the Federal Deposit Insurance Corp. as receiver for Colonial Bank and Platinum Community Bank.
Ocala was a wholly owned subsidiary of Taylor Bean. It was a special purpose entity that only acquired loans for Taylor Bean, which collapsed in 2009 amid a secondary marketing scandal. Several of the company’s top executives — including founder Lee Farkas — have been convicted or pled guilty.
Colonial Bank was Taylor Bean’s warehouse lender that failed in 2009. The FDIC was appointed receiver and sold $22 billion of Colonial’s $25 billion in total assets to BB&T. Two former Colonial executives — Catherine Kissick and Teresa Kelly — admitted their roles in criminally aiding Taylor Bean in the scam.
BofA said that it had filed a proof of claim with the FDIC in the receivership of Colonial and in the receivership of Platinum, another former Taylor Bean subsidiary. But the claims were denied.
So BofA sued the FDIC for $1.75 billion.
“As the primary lender to and co-conspirator with Taylor, Bean & Whitaker Mortgage Corp., a home mortgage originator and servicer, Colonial actively participated in a multi-year, multi-billion dollar fraud, which directly contributed to approximately $1.75 billion in losses for Ocala Funding’s investors,” BofA said in the complaint. “As an affiliate of and co-conspirator with TBW, Platinum also participated in the fraud and contributed directly to Ocala Funding’s losses.”
The FDIC filed a motion to dismiss the case because it had been determined that there were insufficient assets in the Colonial receivership to make distributions to general unsecured creditors.
Among five arguments BofA made in opposing the FDIC’s motion was that priority claims it had filed were not implicated by the FDIC’s “no-value determination.”
The court ruled that BofA has only asserted general unsecured claims and granted the dismissal.
“Because the Colonial receivership will never have the assets necessary to satisfy a judgment in BofA’s favor, this court lacks subject matter jurisdiction over BofA’s claims,” the decision stated. “What is more, the claims against the receivership are prudentially moot.”
