The former chief of a failed Georgia bank was apprehended this week as he returned from the West Indies. Along with another bank executive, he is accused of committing mortgage fraud on multi-million dollar commercial real estate loans.
On Friday, March 20, 2009, federal and state banking regulators marched into five federally insured banks and seized the institutions.
One of those banks was FirstCity Bank, which was closed by the Georgia Department of Banking and Finance and handed over to the Federal Deposit Insurance Corp. as receiver.
The Stockbridge, Ga., bank was in such bad shape that the FDIC couldn’t find another bank to take it over.
The institution was liquidated at an estimated cost of $100 million to the Deposit Insurance Fund. Given that the bank’s assets were less than $300 million — losses were proportionately huge.
Turns out that FirstCity’s losses were the result of an elaborate scam perpetrated by the bank’s former president, Mark A. Conner, and Clayton A. Coe, who was a senior loan officer at FirstCity, according to a press release from the Department of Justice.
An indictment by a federal grand jury was unsealed Monday against the two defendants. Charges include bank fraud and conspiracy to commit bank fraud.
On Sunday, which was the two-year anniversary of FirstCity’s failure, Conner was arrested and taken into custody by federal agents at Miami International Airport upon his arrival from the Turks and Caicos Islands in the West Indies. He made his initial appearance on Monday before a federal magistrate judge — who denied bail and determined that Conner was a flight risk.
Conner’s formal detention hearing is scheduled for tomorrow.
An initial appearance for Coe has not yet been scheduled.
The government said that Conner held a variety of senior positions at the bank between 2004 and 2009 including vice chairman, president, acting chairman and acting chief executive officer.
Coe was a vice president and served as FirstCity’s senior commercial loan officer. His bonus compensation was directly tied to origination volume.
Along with other unnamed conspirators, the pair allegedly hatched a plan to deceive the bank’s loan committee with fraudulent files and, in the process, generate $5 million in unlawful proceeds. The board of directors was also duped.
Borrowers were approved to purchase properties personally owned by Connor and Coe, but the bank was kept in the dark about who the sellers on the properties really were. Some of the commercial mortgages were multi-million dollar.
Bank regulators were also allegedly deceived.
And it wasn’t just FirstCity that was investing in the loans; at least 10 other banks were conned into making loans.
To make matters worse, FirstCity applied for assistance from the Troubled Asset Relief Program — bringing the alleged crime within the jurisdiction of the TARP Special Inspector General Neil Barofsky.
Conner faces 10 years to life in prison and a fine of as much as $10 million.
Coe could be sentenced up to 30 years and fined as much as $1 million.
