Paul Allen, former CEO of the failed mortgage lender Taylor, Bean & Whitaker, was sentenced to 40 months in prison for his role in a $2.9 billion fraud scheme orchestrated by his boss and TBW Chairman Lee Farkas. TBW, based in Ocala, Fla., originated, serviced and sold mortgages in pools to Freddie Mac and relied on various purchase facilities, credit lines and other financing vehicles, usually with Colonial Bank and Ocala Funding. Many of those mortgages didn’t exist and previously foreclosed homes and nonexistent loans served as collateral in some securities, according to court documents. The Special Inspector General of the Troubled Asset Relief Program discovered the fraud when Farkas filed a false application with TARP officials on behalf of Colonial for a $553 million bailout in 2009. Allen pleaded guilty in April to one count of making false statements and one count of conspiring to commit bank and wire fraud. Allen worked out of his home in Oakton, Va., and led Ocala Funding. Ocala sold commercial paper to investors and used the money to fund TBW mortgages. “As TBW’s chief executive officer, Mr. Allen served as an accomplice to Lee Farkas and his massive fraud scheme,” said Assistant Attorney General Lanny Breuer. “He concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion.” Former TBW financial analyst Sean Ragland, who reported to Allen, was also sentenced Tuesday to three months in prison. On June 10, TBW Treasurer Desiree Brown was sentenced to 72 months, and former TBW President Raymond Bowman was sentenced to 30 months in prison for their involvement in the scheme. On June 17, Colonial Bank’s Senior Vice President Catherine Kissick was sentenced to eight years, and Teresa Kelly, the former operations supervisor for the Colonial funding facility, was sentenced to three months in prison for their involvement in the scheme. “Today’s sentence sends a strong message that corporate fraud by senior executives will not be tolerated,” Breuer said. “At the same time, it demonstrates that substantial assistance in the government’s investigation and prosecution of corporate fraud will be taken into account at sentencing.” Lee Farkas was originally scheduled to be sentenced June 27, but the Justice Department said his sentencing was rescheduled to June 30. Write to Jon Prior. Follow him on Twitter @JonAPrior.