TARP case leads to search of bank, lender's Florida offices

In an investigation related to the Treasury Department's bank rescue program, federal agents on Monday searched Florida offices of Colonial Bank and mortgage provider Taylor, Bean & Whitaker.

The two troubled companies announced an unusual deal in March that was intended to help the bank obtain funding from the federal Troubled Asset Relief Program, or TARP.

The special TARP inspector general, the Housing and Urban Development inspector general and the FBI conducted the search.

A spokeswoman for the TARP inspector general said the office could not comment on the investigation but confirmed that search warrants had been executed in Florida. This is the second specific case to surface in the surveillance of the $700-billion federal bailout.

The searches were made on Colonial offices in Orlando and Taylor Bean offices at its headquarters in Ocala.

Merrie Tolbert, communications director for Colonial, said she could not comment on the investigation, but confirmed that the company had been served a search warrant.

Tolbert said the company applied for TARP funding earlier this year but had not received any money from the program.

On March 31, the two companies announced a deal in which Taylor Bean would invest $300 million in Colonial, enabling the bank to increase its capital and thereby qualify for TARP funding.

The deal was subject to final approval by the Treasury to provide TARP funding to Colonial. The deal is not representative of typical arrangements in the TARP program, though whether it was improper by its very design is unclear.

The deal came unglued last month.

In its second-quarter report released Friday, Colonial, which operates 355 branches, reported a net loss of $606 million and warned that there was "substantial doubt about Colonial's ability to operate as a going concern."

Separately, Taylor Bean in June signed a $9-million settlement with regulators in 14 states over allegations involving its mortgage business.

The company's settlement followed an examination of the company's high-risk mortgage origination and loan modifications, and requires that its future practices conform to Treasury Department regulations.


ralph.vartabedian@ latimes.com

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World