Bank Owner Pleads Guilty to Mortgage Fraud

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MORTGAGE EXPERT
1 · 05 · 18

A major stockholder in a bank that failed several years ago has admitted to deceiving officials about his interest in loans made by the bank and to mortgage fraud.

In 2009, Excel Bank opened a loan production office in Clayton Missouri — leading to a dramatic increase in real estate lending for the Sedalia, Missouri-based financial institution.

The bank, which was originally established in 1964, made residential and commercial real estate loans from the location.
A state bank regulator called the CRE lending “aggressive.”

But the bet didn’t pay off, and many of the loans defaulted, while some became non-performing.

By October 2012, the Missouri Division of Finance seized the bank and shut it down at an estimated cost of $41 million to the Federal Deposit Insurance Corp.

It turns out that Excel’s controlling shareholder, Shaun R. Hayes, was behind the aggressive growth.

According to an announcement from the
Office of the Special Inspector General for the Troubled Asset Relief Program, many of the loans made through the production office were substandard — putting the bank at risk.

In
addition, Hayes, 58, allegedly made loans that personally benefited him without disclosing his interest. He also is accused of making fraudulent loans using straw buyers.

In one transaction, $905,000 in proceeds from a loan was used to pay off a loan from Centrue Bank that Hayes and business associate Michael Litz had guaranteed for their company, McKnight Man I LLC. A straw party was used. In addition to concealing the loan from bank officials, neither Hayes or Litz made any payments on the loan.

In another transaction, $600,000 in proceeds from a loan to
Rolling Hills Apartments LLC was given to the pair. The loan was for far more than was needed by the multifamily complex, and the payout was structured through several entities to mask their interests.

“Court documents made part of the guilty plea record show that Hayes assisted in causing Excel Bank to make millions of dollars in loans to straw parties in order to cover the delinquent and substandard loans of 18 investments at other banks,” SIGTARP said. “According to the charges, Excel Bank lost substantial amounts on these loans.”

SIGTARP reported that Hayes pled guilty on Thursday to one count of bank fraud and one count of misapplication of Excel Bank funds. When he is sentenced on April 13, he faces up to 30 years in prison for each count and a fine of $1 million.

Litz is scheduled to go to trial on Jan. 22.

Mortgage Expert

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