Colonial BancGroup Inc. was a bank holding company headquartered in Montgomery, Alabama, USA that failed in 2009. It was a financial services company that, through its subsidiaries, provided diversified services, including retail and commercial banking, wealth management services, mortgage banking and insurance. The company was in the top 50 largest banks in the US prior to its failure and its subsidiary, Colonial Bank, operated 346 branches in the states of Alabama, Georgia, Florida, Nevada and Texas.
The company ran into problems after it was revealed that it had bought $1 billion in mortgages from Taylor, Bean & Whitaker that Taylor Bean had forged, in one of the biggest fraud cases in history. On June 3, 2011 it filed for chapter 11 bankruptcy. The banking assets and branches were sold to BB&T bank under a Federal Deposit Insurance Corporation (FDIC) brokered deal.
The Bank was founded in 1974 in Montgomery, Alabama as Southland Bancorporation. The company changed its name to The Colonial BancGroup, Inc. in 1981.
The principal activity of the BancGroup was to supervise and coordinate the business of its subsidiaries, and to provide them with capital and services. The BancGroup derived substantially all of its income from dividends received from Colonial Bank, it's banking subsidiary. The BancGroup's subsidiary Colonial Brokerage, Inc. provided full service and discount brokerage services and investment advice. The BancGroup had interests in several residential and commercial real estate developments located in the southeastern United States, as well as two in the central Texas area.
On January 31, 2006, Colonial Bank sold its interest in Goldleaf Technologies, Inc., which provides Internet and automated clearing house services to community banks.
Taylor, Bean & Whitaker Mortgage fraud
Between 2004 and 2009 management at Taylor, Bean & Whitaker fraudulently sold $400 million worth of fake mortgages to Colonial with the help of a Colonial bank executive. Court records show, the conspirators, in a scheme they called “Plan B,” sent mortgage data to Colonial Bank for loans that didn't exist or that Taylor Bean had already committed or sold to other third-party investors. The fraud in total would cost colonial $1.9 Billion.
Disclosure and failure
Colonial disclosed its legal problems on August 4, 2009, stating that federal agents had executed a search warrant at its mortgage warehouse lending offices in Orlando, Fla. and that it had been forced to sign a cease and desist order with the Federal Reserve and regulators at the end of last month in relation to its accounting practices and its recognition of losses. On August 14 it was announced that BB&T would buy Colonial's branches and deposits in a deal with the FDIC.
This was the biggest bank failure of 2009. On August 25 Colonial BancGroup filed for Chapter 11 bankruptcy. The bankruptcy case's name is "In re Colonial BancGroup Inc, U.S. Bankruptcy Court, Middle District of Alabama (Montgomery), No. 09-32303".
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