While the financial crisis was responsible for hundreds of bank failures, a fair share of failures were caused by crooked bankers. Some of the defendants worked with other executives within their financial institutions, while others colluded with clients and borrowers.
Bank of the Commonwealth was closed by Virginia’s State Corporation Commission in September 2011. The failure of the $1 billion financial institution was expected to cost the Federal Deposit Insurance Corp. $268 million.
Turns out that the Norfolk, Va., bank’s former chairman and chief executive officer, Edward Woodard, along with his son Troy Brandon Woodard — who was employed by a bank subsidiary — and other former executives were hiding a rapidly deteriorating financial condition, according to the U.S. Attorney for the Eastern District of Virginia. An indictment was handed down on July 11. Others who have been charged in the case include former bank executives Simon Hounslow and Stephen Fields as well as outsiders Thomas E. Arney and Dwight A. Etheridge. In addition, guilty pleas have been extracted from former bank executive Jeremy C. Churchill and outsiders Eric H. Menden, George P. Hranowskyj, Natallia Green, Maria Pukhova and Recardo S. Lewis.
“They allegedly used scheme after scheme to conceal past-due loans and remove foreclosed property from the bank’s books,” SIGTARP Special Inspector General Romero said in the statement. “Today’s charges allege that friends of the bank received sweetheart deals in return for helping mask the bank’s true financial position, and bank insiders personally benefited.”
In April 2011, Western Springs National Bank and Trust was shut down by the Office of the Comptroller of the Currency. The failure of the $187 million bank was projected to deplete the Deposit Insurance Fund by $31 million.
On July 1, the chairman of the Western Springs, Ill., institution, James A. Regas, pled guilty to filing fraudulent call reports with the FDIC in connection with his undisclosed personal interest in loans that resulted in more than $680,000 in losses. He admitted that loans were made between 2004 and 2009 to businesses that he had financial partnerships with, though he denied having any financial relationship with any of the bank’s borrowers in conflict-of-interest statements submitted to the bank. Sentencing for Regas is set for Oct. 25. He faces up to five years in prison.
The Georgia Department of Banking and Finance seized and closed down FirstCity Bank in March 2009. At the time, the FDIC estimated losses from the failure of the $297 million bank would reach $100 million. Clayton A. Coe, who was a senior commercial loan officer for the Stockbridge, Ga., company, pled guilty on June 26 to defrauding FirstCity’s board of directors on an $800,000 loan that he personally profited from, the U.S. Attorney for the Northern District of Georgia said. The loan, which was used to flip a property, was sold to — and eventually repurchased from — two other banks. Coe also admitted that omitted $476,000 in loan commissions from his income tax returns. He’s scheduled for sentencing on Sept. 18 and could face up to 33 years in prison.
Koljo Nikolovski was sentenced to 18 years in prison, the U.S. Attorney for the Northern District of Ohio announced on May 11. Nikolovski, who pled guilty in January, fraudulently obtained several loans totaling $5.6 million from St. Paul Croatian Federal Credit Union between 2003 and 2009. He bribed the credit union’s CEO, Anthony Raguz, with $100,000 in order to obtain loan approvals.
St. Paul was taken over by the National Credit Union Administration in April 2010 at a cost of more than $170 million to the National Credit Union Share Insurance Fund. It was one of the largest credit union collapses in American history, the Justice Department said.
Central Progressive Bank failed in November 2011 and placed into conservatorship by the Louisiana Commissioner of Financial Institutions. The Lacombe, La., institution was only the second bank to fail in the state during the current economic cycle and was expected to result in $58 million in government losses.
The CEO of Central Progressive, Richard S. Blossman Jr., faced an FDIC Notice of Intention to Prohibit From Further Participation in the banking industry in December 2010 but remained with the company until its demise. On May 24, Blossman was charged with one count of bank fraud and one count of false statements. The U.S. Attorney’s Office for the Eastern District of Louisiana alleges that Blossman fraudulently purchased a $200,000 yacht through the bank and sold it for a loss in 2005. He also allegedly issued bonuses to bank directors in order to conceal illegal campaign contributions.
A one-count criminal information was filed against Kimberly D. Laird charging her with stealing $78,594 from PNC Bank while working as a manager of a Pennsylvania branch, according to the U.S. Attorney for the Middle District of Pennsylvania. Laird allegedly opened unauthorized credit accounts in her fathers name and kept the money for herself. She is also accused of redeeming certificates of deposit and opening up fraudulent checking accounts. Laird, who allegedly committed the crimes between 2005 and 2011, pled guilty and faces up to a decade in prison.
