The former head of the now bankrupt mortgage lender Taylor, Bean & Whitaker Mortgage Corp has been charged with fraud in a scheme that led to the misappropriation of more than $1 billion, according to an indictment unsealed on Wednesday.

Lee Farkas, who served as chief executive and later chairman of TBW, was charged with 16 counts, including securities and bank fraud, according to the indictment unsealed in U.S. District Court for the Eastern District of Virginia.

The indictment accused Farkas and unnamed co-conspirators of trying to misappropriate money from banks as well as federal institutions such as Freddie Mac , and also trying to obtain money from the federal bailout program known as the Troubled Asset Relief Program.

The scheme ultimately led to the misappropriation of more than $1 billion, the 30-page indictment said. Farkas and co-conspirators never obtained any TARP funds.

TBW, which made money by servicing mortgage loans sold to Freddie Mac, began experiencing cash flow problems in early 2002, which led Farkas to try to raise funds from Colonial BancGroup and other sources, the indictment said.

Initially, TBW ran up tens of millions of dollars in overdrafts at Colonial BancGroup's bank subsidiary, it said.

Farkas and unnamed co-conspirators then shifted to selling to the bank fake mortgage loans, other home loans that had been sold to others already, or impaired assets, which led to the misappropriation of hundreds of millions of dollars, according to the indictment.

As the financial crisis exploded, Farkas and unnamed co-conspirators at TBW and elsewhere tried to buy a major stake in Colonial BancGroup, the court document said.

With that stake, they had hoped to gain access to more than $500 million Colonial BancGroup had sought from TARP, according to the indictment.

Both TBW and Colonial BancGroup filed for bankruptcy in August 2009.

(Reporting by Jeremy Pelofsky, editing by Gerald E. McCormick and John Wallace)