Opinion ID: 8704066
Heading Depth: 2
Heading Rank: 1

Heading: Overview of TBW’s Operation

Text: As previously stated, TBW operated through a complex web of financial arrangements with a number of financial institutions who operated in a number of different capacities. Before delving into the minutiae of these financing arrangements, it is helpful to understand the interplay between the various entities implicated in this lawsuit. The process started with TBW originating a mortgage loan for an individual homebuyer. TBW funded the loan through a series of funding agreements it had with Colonial. Under these agreements, Colonial advanced funds to TBW in exchange for a 99% ownership interest in the loan; TBW retained a 1% ownership interest. At this point, Colonial and/or TBW sent the loan to BOA to be held for the benefit of Colonial and TBW (in their respective ownership interests). In this way, BOA acted as custodian and bailee of the loan for both Colonial and TBW. Next, TBW’s subsidiary, Ocala, purchased Colonial’s 99% ownership interest in the loan, thereby effectively paying Colonial back the amounts Colonial had extended to fund the loan. Ocala raised the money needed to purchase Colonial’s 99% ownership interest by selling short-term notes to outside investors, to wit, Deutsche Bank (“DB”) and BNP Paribas (“BNP”). TBW then notified BOA of Ocala’s purchase of the loans and BOA would send the sale proceeds to Colonial from an account that Ocala maintained at BOA. At this point, BOA’s relationship to the loan changed. BOA still held the loan, but now it retained the loan as the indenture trustee, custodian, and collateral agent for Ocala and Ocala’s outside investors (ie., DB and BNP). BOA held the loan in a collateral account that Ocala maintained at BOA. Next, TBW arranged for Ocala to sell the loan to Freddie Mac. The proceeds from that sale were placed in Ocala’s collateral account at BOA and were either used to pay back DB and BNP or to purchase more loans from Colonial. Finally, BOA would send the loan to a Freddie Mac custodial account at Colonial. The transaction was then complete. The fractures in TBW’s operation were not discovered until TBW collapsed in August 2009. At that point, the participants realized that TBW had been manipulating the system. BOA alleges that Farkas and employees at Colonial and Platinum fraudulently diverted virtually all of Ocala’s assets, the result of which was that Ocala was unable to make payments to its outside investors, and DB and BNP ultimately lost approximately $1.7 billion. BOA seeks to recover this loss from the FDIC as the Receiver for both Colonial and Platinum. The FDIC, in turn, alleges that at some point in 2008, TBW began to manipulate its operation such that thousands of loans were pledged as collateral to Ocala, Colonial, and Freddie Mac at the same time. The FDIC alleges that Colonial was unaware of this “multi-pledging scheme” and ultimately lost a total of $900 million. The FDIC claims that BOA was complicit in the “multi-pledging” and seeks to recover the $900 million loss from BOA. With this background in mind, the Court now turns to the detailed factual allegations asserted by both BOA and the FDIC.