Whoever said that nobody has gone to jail for causing the financial crisis hasn’t been following the numerous criminal cases against former executives of failed banks. Defendants are accused of a range of crimes including mortgage fraud, embezzlement and accounting fraud.
A 30-month sentence was handed down on April 30 to Gregory William Bell. The defendant, who pled guilty three months ago in U.S. District Court for the District of Colorado, was an officer at New Frontier Bank where he allegedly made a false book entry to cover up a fraudulent $5,583,500 loan and hid the bank’s financial condition through deceit and manipulation.
New Frontier, which had $2 billion in assets, failed in April 2009 and was liquidated by the Federal Deposit Insurance Corp. at an estimated cost of $670 million to the FDIC’s Deposit Insurance Fund.
When Appalachian Community Bank was closed down by the Georgia Department of Banking and Finance in March 2010, it was expected to cost the FDIC more than $400 million. Adam Teague, who was the former senior vice president of the $1 billion institution, was sentenced on April 5 to more than five years in prison for conspiring to defraud the Ellijay, Ga., bank.
An announcement from the U.S. Attorney’s Office for the Northern District of Georgia indicated that Teague conspired with others to hide delinquent loans from the FDIC by making fraudulent loans to co-conspirators that made it look like foreclosed properties had been sold by the bank. Around $7 million in fraudulent mortgages were involved.
James Cockinos was a member of the board of directors at Mariner’s Bank. He also was a mortgage broker through his firm, Federated Mortgage Company of America. An April 11 news release from the U.S. Attorney’s Office for the District of New Jersey indicated that Cockinos admitted he falsified asset, employment and income data on an application for a $1.48 million loan from Washington Mutual Bank. The borrower on the loan defaulted, leaving WaMu parent JPMorgan Chase with a $500,000 loss.
Cockinos pled guilty on April 11 to one count of conspiracy to commit bank fraud. He faces up to 30 years in prison at his sentencing scheduled for July 23.
Former Fifth Third Bank assistant vice president Eric Morton pled guilty to mortgage fraud along with Mounif Zeaiter and former title company executive Majed Tawbe, according to a March 26 announcement from the U.S. Attorney’s Office for the Eastern District of Michigan. In addition, a federal jury found Hussein “Sam” Nazzal and Edward A. Schneider guilty in the same case.
Fifth Third was deceived on $750,000 in fraudulent loans, and Morton allegedly accepted bribes. Another bank, Standard Federal Bank, was deceived into making a $500,000 mortgage.
During his time as chief executive officer of People’s Bank of the South from 2004 until 2012, Larry Barnette Hill embezzled around $1 million, according to the U.S. Attorney’s Office for the Southern District of Mississippi. Hill fraudulently withdrew bank funds then passed on the money to relatives through shell bank accounts. He also used the Bude, Miss., bank’s credit cards and checks to pay personal expenses.
Hill pled guilty on April 15 and is scheduled for sentencing on July 11. The maximum sentence for bank fraud is 30 years in prison, while the maximum sentence for money laundering is 20 years.
A December 2011 grand jury indictment charged Lyle J. Spaulding with eight counts of bank fraud that was allegedly committed while he worked at three Illinois banks between December 2007 and December 2009. The banks were Freedom Bank, UnionBank and Amcore Bank, N.A. Spalding allegedly approved commercial loans to family members without disclosing his relationships to the banks, took kickbacks from borrowers and misclassified loans as commercial to exceed his approval limits.
Spaulding pled guilty on April 2 and is scheduled for sentencing on July 8, the Daily Gazette reported.
The former president and CEO of First Community Bank, Reginald R. Harper, was sentenced to 24 years in prison, while co-defendant Troy A. Fouquet was sentenced to 18 months, according to the U.S. Attorney for the Eastern District of Louisiana. Both defendants pled guilty last year.
Harper allegedly approved more than $2 million in construction-and-development loans for Fouquet in 2004. But when qualified buyers couldn’t be found, the pair schemed to hide the bad loans in 2005. As a result, the Hammond, La., bank ultimately “suffered severe financial losses.”
Edward J. Woodard Jr., the former president and chief executive officer of Bank of Commonwealth; his son T. Brandon Woodard, a former vice president at Bank of Commonwealth’s mortgage subsidiary; and developer Dwight Etheridge are all on trial for their roles in the September 2011 failure of the $1 billion Norfolk, Va., bank.
A former collections manager at the Bank of Commonwealth testified that executives regularly instructed her to remove delinquent loans from monthly reports without the proper documentation and that the senior Woodard once scolded her for writing about delinquency reporting practices, the Virginia Pilot reported. The younger Woodard reportedly testified that he did not receive preferential treatment because of his family ties. Another former bank executive, Stephen Fields, testified that he wasn’t bribed event though bank clients provided him granite countertops for his home allegedly in return for favorable treatment on their loans.