The former chief of mortgage lender Taylor, Bean & Whitaker Mortgage Corp. was sentenced to more than three years in prison Tuesday for his role in a fraud case the Justice Department said cost investors $2.4 billion.

In April, Paul Allen pleaded guilty to a count of making false statements and another count of conspiring to commit bank and wire fraud. He was given a 40-month sentence; he faced up to five years in prison for each of two counts.

Also Tuesday, the judge for the Eastern District of Virginia sentenced Sean Ragland, a former senior financial analyst at Taylor, Bean & Whitaker who reported to Allen, to three months in prison.

The two join four others linked to the fraud who were given prison sentences ranging from three months to eight years.

According the Justice Department, Allen admitted that he learned a Taylor, Bean & Whitaker lending facility, known as Ocala Funding, didn't have enough assets to back up obligations--a funding "hole" he admitted to helping cover up from investors and regulators. At the time Taylor, Bean & Whitaker ceased operating, that hole amounted to about $1.5 billion.

The fraud contributed to the collapse of Colonial Bank, which became part of BB&T Corp. Tuesday, the Justice Department said investors in Colonial Bank also lost $900 million because of the scheme.

Prosecutors have framed the downfall of the mortgage lender and Colonial bank as a massive fraud scheme led by Lee Farkas, the chairman and majority owner of Taylor, Bean & Whitaker. Farkas was convicted in April on 14 of 16 counts of fraud for his role. He is set to be sentenced Monday.

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