ST. LOUIS, MO — 1/19/2014 - Three St. Louis-area businessmen recently surrendered to authorities on two separate indictments alleging bank fraud against Excel Bank, which failed in 2012 after receiving $4,000,000 in capital from the Treasury Department through the Troubled Asset Relief Program (TARP).
According to the indictments, William Glasgow owned dozens of rental properties as part of his real estate business, Glasgow Realty, and did business with Excel Bank, the holding company of which was Investors Financial Corporation of Pettis County, Missouri. The indictment states that Glasgow had two loans on his rental properties, which he received by falsifying documentation.
In a separate unrelated indictment, James Crews and Michael Hilbert are alleged to have engaged in the real estate business, doing business through various entities including Crews Corporation, Hillcrew Properties, Merz Properties, Eagle Group, and Marathon RE. They owned dozens of rental properties in the St. Louis area and are alleged to have defrauded Excel Bank by submitting numerous draw requests for hundreds of thousands of dollars in escrow funds set aside for improvements to those properties.
William Glasgow, Town & Country, Missouri, was indicted by a federal grand jury on two felony counts of bank fraud. In a separate unrelated indictment, James Crews, Wentzville, Missouri; and Michael Hilbert, St. Charles, Missouri, were indicted the same day on two felony counts each of bank fraud. The indictments were returned December 11, 2013, but remained sealed until the defendants appeared in federal court for arraignment on Jan. 10 in St. Louis.
If convicted, each count of bank fraud carries a maximum penalty of 30 years in prison and/or fines up to $1 million. In determining the actual sentences, a judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.
The case was investigated by the Office of the Special Inspector General for the Troubled Asset Relief Program and the Federal Bureau of Investigation. Assistant United States Attorney Tom Albus is handling the case for the U.S. Attorney’s Office.
Defendants are presumed innocent until proven guilty.
Source: Federal Bureau of Investigation
Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Coalition Questions Cost of Bank 'Swipe' Fees
WASHINGTON- (BUSINESS WIRE) - 5/12/2012 - In a May 11 news article, USA Today exposed some of the myths banks propagate about hidden, exorbitant “swipe” fees the banks charge retailers when customers buy with credit or debit cards, said the Merchants Payments Coalition.
The article also makes a strong case for reforming the way Visa and MasterCard and their bank members fix the fees that consumers pay when they “swipe” their cards.
American merchants pay the highest swipe fees in the industrialized world, which pushes up prices at their stores. Because MasterCard and Visa fix fees for their banks, which refuse to compete on price, the fees have become retailers’ second-highest operating cost, after labor, and a real obstacle for small merchants in particular.
Here is what the newspaper found:
First, consumers are saving from debit reform. Public reports for America’s largest retailers show that operating margins fell in the fourth quarter of 2011, when the Durbin Amendment to the Dodd-Frank financial reform law reduced debit card fees. That means those retailers were passing along any savings they might have, and then some. And some companies are giving discounts specifically for using debit cards, including, among others, Ikea, Nice N Easy Grocery Shoppes and some Exxon and Arco stations.
Second, free checking has not disappeared under the Durbin Amendment, as the banks claimed it would. In fact, more banks offered free checking after reform than before and overall prices on bank accounts dropped.
In the second half of 2011, 39 percnet of banks offered checking accounts with no monthly maintenance fee, up from 35 percent for the first part of the year, according to a survey of the 50 largest banks and 50 midsize and small banks by MoneyRates.com.
Even at the big banks that charged a fee for checking accounts, the average cost fell to $11.28 from $11.75, the survey found. The average minimum balance required to avoid a monthly fee also fell, to $391.41 from $412.53 in mid-2011.
Third, small banks have benefitted from the reforms. The rates those banks charge on debit cards has not been driven down at all by Durbin, which does not apply to them.
"So far, it has turned out to be not nearly as bad as we were concerned it might have been," says Bill Hampel, chief economist for the Credit Union National Association, the trade association for credit unions.
Debit cards are still offering rewards, though some programs have changed strategies. “Instead of cash back or miles, some banks have switched to rewards programs that give debit-card holders points that can be used to get discounts on specific purchases," said Alex Matjanec, co-founder of MyBankTracker.com.
For example, a consumer who buys a lot of coffee might receive points that can be used to get a discount at Starbucks.
Finally, savings for consumers would have been bigger, but the Federal Reserve’s mistakes in setting its rules let banks charge more for small purchases.
Retailers who previously paid as little as 4 cents on a small debit card transaction found themselves hit with a 21-cent fee.
"A customer buying a can of soda on a debit card is costing me more today than it did before the legislation," said Ari Haseotes, president of Cumberland Farms, which operates almost 600 gas and convenience stores in 11 states across the Northeast and in Florida.
Meanwhile Visa and MasterCard announced big jumps in profit for their latest quarter, and Visa said it was under a federal antitrust investigation into the way it handles debit card fees.
“Were the Fed to reform its rules,” said Doug Kantor, counsel to the Merchants Payments Coaliton, a group of retailers that fights exorbitant swipe fees, “consumers would be saving even more. “And that’s not even counting credit cards; reforming that broken market should be the next step toward fairness.”
The article also makes a strong case for reforming the way Visa and MasterCard and their bank members fix the fees that consumers pay when they “swipe” their cards.
American merchants pay the highest swipe fees in the industrialized world, which pushes up prices at their stores. Because MasterCard and Visa fix fees for their banks, which refuse to compete on price, the fees have become retailers’ second-highest operating cost, after labor, and a real obstacle for small merchants in particular.
Here is what the newspaper found:
First, consumers are saving from debit reform. Public reports for America’s largest retailers show that operating margins fell in the fourth quarter of 2011, when the Durbin Amendment to the Dodd-Frank financial reform law reduced debit card fees. That means those retailers were passing along any savings they might have, and then some. And some companies are giving discounts specifically for using debit cards, including, among others, Ikea, Nice N Easy Grocery Shoppes and some Exxon and Arco stations.
Second, free checking has not disappeared under the Durbin Amendment, as the banks claimed it would. In fact, more banks offered free checking after reform than before and overall prices on bank accounts dropped.
In the second half of 2011, 39 percnet of banks offered checking accounts with no monthly maintenance fee, up from 35 percent for the first part of the year, according to a survey of the 50 largest banks and 50 midsize and small banks by MoneyRates.com.
Even at the big banks that charged a fee for checking accounts, the average cost fell to $11.28 from $11.75, the survey found. The average minimum balance required to avoid a monthly fee also fell, to $391.41 from $412.53 in mid-2011.
Third, small banks have benefitted from the reforms. The rates those banks charge on debit cards has not been driven down at all by Durbin, which does not apply to them.
"So far, it has turned out to be not nearly as bad as we were concerned it might have been," says Bill Hampel, chief economist for the Credit Union National Association, the trade association for credit unions.
Debit cards are still offering rewards, though some programs have changed strategies. “Instead of cash back or miles, some banks have switched to rewards programs that give debit-card holders points that can be used to get discounts on specific purchases," said Alex Matjanec, co-founder of MyBankTracker.com.
For example, a consumer who buys a lot of coffee might receive points that can be used to get a discount at Starbucks.
Finally, savings for consumers would have been bigger, but the Federal Reserve’s mistakes in setting its rules let banks charge more for small purchases.
Retailers who previously paid as little as 4 cents on a small debit card transaction found themselves hit with a 21-cent fee.
"A customer buying a can of soda on a debit card is costing me more today than it did before the legislation," said Ari Haseotes, president of Cumberland Farms, which operates almost 600 gas and convenience stores in 11 states across the Northeast and in Florida.
Meanwhile Visa and MasterCard announced big jumps in profit for their latest quarter, and Visa said it was under a federal antitrust investigation into the way it handles debit card fees.
“Were the Fed to reform its rules,” said Doug Kantor, counsel to the Merchants Payments Coaliton, a group of retailers that fights exorbitant swipe fees, “consumers would be saving even more. “And that’s not even counting credit cards; reforming that broken market should be the next step toward fairness.”
Holding Company CEO Charged with Bank Fraud
BROOKLYN, N.Y. – 4/13/2012 - The former chief executive officer of a publicly held food products company that traded on the NASDAQ and manufactured and distributed a line of baking mixes and spices was indicted on April 13 on conspiracy, bank fraud and false statement charges arising out his scheme to inflate Synergy’s sales through a $26 million bank fraud scheme. Mair Faibish, the former chief executive officer of Synergy Brands Inc., was arrested earlier in the day and was due to appear in court before U.S. Magistrate Judge Viktor V. Pohorelsky in Brooklyn.
The charges were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York; James T. Hayes Jr., Special Agent-in-Charge, Department of Homeland Security (DHS), Homeland Security Investigations (HSI), New York Field Office; and Nassau County, N.Y., Police Commissioner Thomas V. Dale.
As alleged in the indictment, the defendant and his co-conspirators fraudulently inflated Synergy’s sales by approximately 20 percent for the quarter ending June 30, 2008, through an international check kiting scheme in which they kited approximately $750 million worth of checks not backed by sufficient funds through various banks in the United States and Canada.
The defendant caused those checks to be deposited into bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, but also not backed by sufficient funds, back to Synergy. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ bank account balances while the scheme was ongoing. The defendant and his co-conspirators used Synergy’s fraudulently inflated bank account balance to book millions of dollars in fictitious accounts receivable and revenue. By the end of the scheme, Signature Bank had lost approximately $26 million that the defendant and his co-conspirators had withdrawn before the bank discovered the scheme.
In addition to the bank fraud and conspiracy charges, the indictment charges that the defendant made false statements to the U.S. Securities and Exchange Commission (SEC) about Synergy’s financial condition in a public filing, specifically: (1) that Synergy had approximately $44.5 million in sales, when approximately 20 percent of those sales were fictitious; (2) that Synergy had approximately $40 million in cost of goods sold, when approximately 20 percent of the cost of goods sold was fictitious; and (3) that Synergy recognized approximately $1.5 million in “prepaid expenses,” when at least 25 percent of those prepaid expenses were fictitious.
According to the company’s filings with the SEC, Synergy was a holding company with subsidiaries that distributed nationally known food and beauty products to retailers and wholesalers and manufactured baking products through its Loretta Baking Mix Products subsidiary. Synergy also sold premium cigars to restaurants, hotels, casinos and country clubs as well as directly to consumers over the Internet and through its retail store in Miami.
“The defendant allegedly defrauded an FDIC-insured bank out of millions of dollars through a massive check-kiting scheme, as well as fraudulently inflated Synergy’s financial statements in order to make the struggling company appear prosperous. These false representations were then provided to the SEC and the investing public,” Lynch said. “Corporate executives who abuse their positions of trust can expect to be investigated and prosecuted to the full extent of the law.”
If convicted, the defendant faces a maximum sentence of 30 years in prison on the most serious charge in the indictment.
The government’s case is being prosecuted by Assistant U.S. Attorneys Ilene Jaroslaw and Sylvia Shweder.
Source: Financial Fraud Enforcement Task Force
The charges were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York; James T. Hayes Jr., Special Agent-in-Charge, Department of Homeland Security (DHS), Homeland Security Investigations (HSI), New York Field Office; and Nassau County, N.Y., Police Commissioner Thomas V. Dale.
As alleged in the indictment, the defendant and his co-conspirators fraudulently inflated Synergy’s sales by approximately 20 percent for the quarter ending June 30, 2008, through an international check kiting scheme in which they kited approximately $750 million worth of checks not backed by sufficient funds through various banks in the United States and Canada.
The defendant caused those checks to be deposited into bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, but also not backed by sufficient funds, back to Synergy. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ bank account balances while the scheme was ongoing. The defendant and his co-conspirators used Synergy’s fraudulently inflated bank account balance to book millions of dollars in fictitious accounts receivable and revenue. By the end of the scheme, Signature Bank had lost approximately $26 million that the defendant and his co-conspirators had withdrawn before the bank discovered the scheme.
In addition to the bank fraud and conspiracy charges, the indictment charges that the defendant made false statements to the U.S. Securities and Exchange Commission (SEC) about Synergy’s financial condition in a public filing, specifically: (1) that Synergy had approximately $44.5 million in sales, when approximately 20 percent of those sales were fictitious; (2) that Synergy had approximately $40 million in cost of goods sold, when approximately 20 percent of the cost of goods sold was fictitious; and (3) that Synergy recognized approximately $1.5 million in “prepaid expenses,” when at least 25 percent of those prepaid expenses were fictitious.
According to the company’s filings with the SEC, Synergy was a holding company with subsidiaries that distributed nationally known food and beauty products to retailers and wholesalers and manufactured baking products through its Loretta Baking Mix Products subsidiary. Synergy also sold premium cigars to restaurants, hotels, casinos and country clubs as well as directly to consumers over the Internet and through its retail store in Miami.
“The defendant allegedly defrauded an FDIC-insured bank out of millions of dollars through a massive check-kiting scheme, as well as fraudulently inflated Synergy’s financial statements in order to make the struggling company appear prosperous. These false representations were then provided to the SEC and the investing public,” Lynch said. “Corporate executives who abuse their positions of trust can expect to be investigated and prosecuted to the full extent of the law.”
If convicted, the defendant faces a maximum sentence of 30 years in prison on the most serious charge in the indictment.
The government’s case is being prosecuted by Assistant U.S. Attorneys Ilene Jaroslaw and Sylvia Shweder.
Source: Financial Fraud Enforcement Task Force
Latest Bank Crime Statistics Show Decrease
WASHINGTON, D.C. - 9/18/2011 - During the second quarter of 2011, there were 1,023
reported violations of the Federal Bank Robbery and Incidental Crimes
Statue, a decrease from the 1,146 reported violations in the same
quarter of 2010.1 According to statistics released on Sept. 7 by
the FBI, there were 1,007 robberies, 15 burglaries, one larceny, and two
extortions of financial institutions2 reported between April 1, 2011 and June 30, 2011.
Highlights of the report include:
2 Financial institutions include commercial banks, mutual savings banks, savings and loan associations, and credit unions.
3 One or more acts of violence may occur during an incident.
4 More than one modus operandi may have been used during an incident.
Source: Federal Bureau of Investigation Release
Highlights of the report include:
- Loot was taken in 91 percent of the incidents, totaling more than $7.8 million.
- Of the loot taken, 23 percent of it was recovered. More than $1.8 million was recovered and returned to financial institutions.
- Bank crimes most frequently occurred on Friday. Regardless of the day, the time frame when bank crimes occurred most frequently was between 9:00 a.m. and 11:00 a.m.
- Acts of violence were committed in 4 percent of the incidents, resulting in 31 injuries, one death, and three persons taken hostage.3
- Demand notes 4 were the most common modus operandi used.
- Most violations occurred in the Southern region of the U.S., with 373 reported incidents.
- These statistics were recorded as of August 2, 2011. Note that not all bank crimes are reported to the FBI, and therefore the report is not a complete statistical compilation of all bank crimes that occurred in the U.S.
2 Financial institutions include commercial banks, mutual savings banks, savings and loan associations, and credit unions.
3 One or more acts of violence may occur during an incident.
4 More than one modus operandi may have been used during an incident.
Source: Federal Bureau of Investigation Release
Ocean Bank Agrees to Pay $10.9 Million Penalty
WASHINGTON, DC - 8/29/2011 - The Federal Deposit Insurance Corporation (FDIC), the Treasury's Financial Crimes Enforcement Network (FinCEN), and the State of Florida Office of Financial Regulation (OFR) announced on Aug. 11 the assessment of concurrent civil money penalties of $10.9 million against Ocean Bank, Miami, Fla., for violations of federal and state Bank Secrecy Act (BSA) and anti-money (AML) laundering laws and regulations.
Ocean Bank, without admitting or denying the allegations, consented to payment of the civil money penalties, which was satisfied by a single payment to the U.S. Government.
"Effective Bank Secrecy Act/anti-money laundering programs commensurate with the risk profile of the institution is paramount in protecting our financial system and individual banks from harm," said Sandra L. Thompson, Director, Division of Risk Management Supervision. "This penalty underscores the significance for banks to have strong internal systems and controls to detect and report suspicious activity and ensure compliance with Bank Secrecy Act requirements."
In taking these actions, the FDIC, FinCEN, and OFR determined that the bank failed to implement an effective BSA/AML Compliance Program with internal controls reasonably designed to detect and report money laundering and other suspicious activity in a timely manner. The bank failed to conduct adequate independent testing, particularly with respect to suspicious activity reporting requirements. In addition, the bank failed to sufficiently staff the BSA compliance function with appropriately trained staff to ensure compliance with BSA requirements.
"The Bank failed to recognize and mitigate risks and report transaction activity often associated with money laundering involving direct foreign account relationships in high-risk jurisdictions, particularly Venezuela," noted FinCEN Director James H. Freis, Jr. "The Bank's failure to respond to such risk with commensurate systems and controls was both systemic and longstanding."
Florida Office of Financial Regulation Commissioner Tom Cardwell said the OFR will continue to monitor Ocean Bank's efforts to enhance its BSA/AML program.
"We are confident the bank is committed to be in full compliance with the letter and spirit of the Consent Order and Agreement," Cardwell said.
Source: Financial Crimes Enforcement Network.
Ocean Bank, without admitting or denying the allegations, consented to payment of the civil money penalties, which was satisfied by a single payment to the U.S. Government.
"Effective Bank Secrecy Act/anti-money laundering programs commensurate with the risk profile of the institution is paramount in protecting our financial system and individual banks from harm," said Sandra L. Thompson, Director, Division of Risk Management Supervision. "This penalty underscores the significance for banks to have strong internal systems and controls to detect and report suspicious activity and ensure compliance with Bank Secrecy Act requirements."
In taking these actions, the FDIC, FinCEN, and OFR determined that the bank failed to implement an effective BSA/AML Compliance Program with internal controls reasonably designed to detect and report money laundering and other suspicious activity in a timely manner. The bank failed to conduct adequate independent testing, particularly with respect to suspicious activity reporting requirements. In addition, the bank failed to sufficiently staff the BSA compliance function with appropriately trained staff to ensure compliance with BSA requirements.
"The Bank failed to recognize and mitigate risks and report transaction activity often associated with money laundering involving direct foreign account relationships in high-risk jurisdictions, particularly Venezuela," noted FinCEN Director James H. Freis, Jr. "The Bank's failure to respond to such risk with commensurate systems and controls was both systemic and longstanding."
Florida Office of Financial Regulation Commissioner Tom Cardwell said the OFR will continue to monitor Ocean Bank's efforts to enhance its BSA/AML program.
"We are confident the bank is committed to be in full compliance with the letter and spirit of the Consent Order and Agreement," Cardwell said.
Source: Financial Crimes Enforcement Network.
Former TBW CEO Gets 40-Month Prison Sentence
WASHINGTON – 6/22/2011 - The former chief executive officer (CEO) of Taylor, Bean & Whitaker (TBW) was sentenced on June 21 to 40 months in prison for his role in a more than $2.9 billion fraud scheme that contributed to the failure of TBW. At one time, TBW was one of the largest privately held mortgage lending companies in the United States.
Allen, 55, of Oakton, Va., pleaded guilty in April 2011 to one count of making false statements and one count of conspiring to commit bank and wire fraud. Co-conspirator Sean Ragland, a former senior financial analyst at TBW who reported to Allen, was also sentenced today by Judge Brinkema to three months in prison. Ragland, 37, of San Antonio, pleaded guilty in March 2011 to one count of conspiracy to commit bank and wire fraud. Allen and Ragland both admitted to conspiring with Lee Bentley Farkas, the former chairman of TBW, and others, to defraud financial institutions that had invested in Ocala Funding LLC, a facility wholly-owned by TBW.
Farkas was convicted on April 19, 2011, on 14 counts of fraud for his role in masterminding the scheme, which was one of the largest bank frauds in the country. Farkas is scheduled to be sentenced on June 27, 2011. The Securities and Exchange Commission (SEC) has a civil action pending against Farkas in the Eastern District of Virginia.
Co-conspirators Catherine Kissick, a former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD); Teresa Kelly, a former operations supervisor in Colonial Bank’s MWLD; Raymond Bowman, the former president of TBW; and Desiree Brown, the former treasurer of TBW, have also pleaded guilty for their participation in the scheme. Earlier this month, Kissick was sentenced to eight years in prison, Brown was sentenced to six years in prison, Bowman was sentenced 30 months in prison and Kelly was sentenced to three months in prison.
“As TBW’s chief executive officer, Mr. Allen served as an accomplice to Lee Farkas and his massive fraud scheme,” Assistant Attorney General Lanny Breuer said. “He concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion. Today’s sentence sends a strong message that corporate fraud by senior executives will not be tolerated. At the same time, it demonstrates that substantial assistance in the government’s investigation and prosecution of corporate fraud will be taken into account at sentencing.”
According to court documents and information presented at trial, Allen and Ragland participated in the scheme from early 2005 through August 2009 by distributing materially false documents to investors in Ocala Funding that misrepresented the financial condition of the facility. The fraud scheme ultimately caused investors in Ocala Funding to lose more than $1.5 billion and Colonial Bank to lose $900 million.
Furthermore, the documents suggest, TBW began running overdrafts in its master bank account at Colonial Bank because of TBW’s inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. In or about 2002, Farkas and other co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious “sales” of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed “Plan B.”
The conspirators accomplished Plan B by selling Colonial Bank mortgage loans that did not exist or that TBW had already committed or sold to other third-party investors. As Plan B evolved, co-conspirators at TBW also caused TBW to engage in sham sales of groups of mortgage loans, known as “pools,” that other entities already owned to Colonial Bank. As a result, false information was entered on Colonial Bank’s books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans, when in fact the pools had no value and could not be securitized or sold. Neither Allen nor Ragland participated in the effort to cover up TBW’s overdrafts or Plan B.
Additionally, the co-conspirators at TBW caused TBW to misappropriate more than $1.5 billion in collateral from Ocala Funding. According to court documents, both Allen and Ragland played significant roles in the Ocala Funding misappropriation. The misappropriation caused Colonial Bank and the Federal Home Loan Mortgage Corporation (Freddie Mac) to falsely believe that they each had an undivided ownership interest in thousands of the same loans worth hundreds of millions of dollars.
According to court documents, the fraud scheme also included an effort by certain conspirators in the fall of 2008 to obtain $570 million in taxpayer funding through the Capital Purchase Program, a sub-program of the U.S. Treasury Department’s TARP. In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loan and securities assets held by Colonial Bank as a result of the fraudulent activity at TBW. Colonial BancGroup never received the TARP funding. According to court documents, Allen played a key role in causing materially false information to be submitted to and received by the government in connection with Colonial Bank’s TARP application. Ragland was not aware of this aspect of the fraud scheme.
In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.
“Instead of upholding his position of power and trust as CEO of TBW, Paul Allen chose the path of fraud and deception in helping facilitate the long-running fraud carried out by TBW and Colonial Bank. Fortunately, the scheme came to a halt when an attempt was made to steal more than a half billion dollars from the TARP,” said Acting Special Inspector General for the TARP Romero. “Today’s sentence appropriately recognizes the severity of Allen’s participation in the fraud along with his cooperation in the government’s investigation.”
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS-CI. The department recognizes the substantial assistance of the SEC. The department also recognizes the assistance of the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury.
Allen was sentenced by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia.
Source: U.S. Department of Justice release.
Allen, 55, of Oakton, Va., pleaded guilty in April 2011 to one count of making false statements and one count of conspiring to commit bank and wire fraud. Co-conspirator Sean Ragland, a former senior financial analyst at TBW who reported to Allen, was also sentenced today by Judge Brinkema to three months in prison. Ragland, 37, of San Antonio, pleaded guilty in March 2011 to one count of conspiracy to commit bank and wire fraud. Allen and Ragland both admitted to conspiring with Lee Bentley Farkas, the former chairman of TBW, and others, to defraud financial institutions that had invested in Ocala Funding LLC, a facility wholly-owned by TBW.
Farkas was convicted on April 19, 2011, on 14 counts of fraud for his role in masterminding the scheme, which was one of the largest bank frauds in the country. Farkas is scheduled to be sentenced on June 27, 2011. The Securities and Exchange Commission (SEC) has a civil action pending against Farkas in the Eastern District of Virginia.
Co-conspirators Catherine Kissick, a former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD); Teresa Kelly, a former operations supervisor in Colonial Bank’s MWLD; Raymond Bowman, the former president of TBW; and Desiree Brown, the former treasurer of TBW, have also pleaded guilty for their participation in the scheme. Earlier this month, Kissick was sentenced to eight years in prison, Brown was sentenced to six years in prison, Bowman was sentenced 30 months in prison and Kelly was sentenced to three months in prison.
“As TBW’s chief executive officer, Mr. Allen served as an accomplice to Lee Farkas and his massive fraud scheme,” Assistant Attorney General Lanny Breuer said. “He concealed TBW’s staggering deficits through false financial reports, which ultimately caused investors to lose more than $1.5 billion. Today’s sentence sends a strong message that corporate fraud by senior executives will not be tolerated. At the same time, it demonstrates that substantial assistance in the government’s investigation and prosecution of corporate fraud will be taken into account at sentencing.”
According to court documents and information presented at trial, Allen and Ragland participated in the scheme from early 2005 through August 2009 by distributing materially false documents to investors in Ocala Funding that misrepresented the financial condition of the facility. The fraud scheme ultimately caused investors in Ocala Funding to lose more than $1.5 billion and Colonial Bank to lose $900 million.
Furthermore, the documents suggest, TBW began running overdrafts in its master bank account at Colonial Bank because of TBW’s inability to meet its operating expenses, which included payroll, servicing payments owed to third-party purchasers of loans and/or mortgage-backed securities and other obligations. In or about 2002, Farkas and other co-conspirators engaged in a series of fraudulent actions to cover up the overdrafts, first by sweeping overnight money from one TBW account with excess funds into another, and later through the fictitious “sales” of mortgage loans to Colonial Bank, a fraud scheme the conspirators dubbed “Plan B.”
The conspirators accomplished Plan B by selling Colonial Bank mortgage loans that did not exist or that TBW had already committed or sold to other third-party investors. As Plan B evolved, co-conspirators at TBW also caused TBW to engage in sham sales of groups of mortgage loans, known as “pools,” that other entities already owned to Colonial Bank. As a result, false information was entered on Colonial Bank’s books and records, giving the appearance that the bank owned interests in legitimate pools of mortgage loans, when in fact the pools had no value and could not be securitized or sold. Neither Allen nor Ragland participated in the effort to cover up TBW’s overdrafts or Plan B.
Additionally, the co-conspirators at TBW caused TBW to misappropriate more than $1.5 billion in collateral from Ocala Funding. According to court documents, both Allen and Ragland played significant roles in the Ocala Funding misappropriation. The misappropriation caused Colonial Bank and the Federal Home Loan Mortgage Corporation (Freddie Mac) to falsely believe that they each had an undivided ownership interest in thousands of the same loans worth hundreds of millions of dollars.
According to court documents, the fraud scheme also included an effort by certain conspirators in the fall of 2008 to obtain $570 million in taxpayer funding through the Capital Purchase Program, a sub-program of the U.S. Treasury Department’s TARP. In connection with the application, Colonial BancGroup submitted financial data and filings that included materially false information related to mortgage loan and securities assets held by Colonial Bank as a result of the fraudulent activity at TBW. Colonial BancGroup never received the TARP funding. According to court documents, Allen played a key role in causing materially false information to be submitted to and received by the government in connection with Colonial Bank’s TARP application. Ragland was not aware of this aspect of the fraud scheme.
In August 2009, the Alabama State Banking Department, Colonial Bank’s regulator, seized the bank and appointed the FDIC as receiver. Colonial BancGroup also filed for bankruptcy in August 2009.
“Instead of upholding his position of power and trust as CEO of TBW, Paul Allen chose the path of fraud and deception in helping facilitate the long-running fraud carried out by TBW and Colonial Bank. Fortunately, the scheme came to a halt when an attempt was made to steal more than a half billion dollars from the TARP,” said Acting Special Inspector General for the TARP Romero. “Today’s sentence appropriately recognizes the severity of Allen’s participation in the fraud along with his cooperation in the government’s investigation.”
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS-CI. The department recognizes the substantial assistance of the SEC. The department also recognizes the assistance of the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury.
Allen was sentenced by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia.
Source: U.S. Department of Justice release.
Former CEO Pleads Guilty to $1.5 Billion Scheme
WASHINGTON – 4/3/2011 - Paul Allen, the former chief executive officer at Taylor, Bean & Whitaker (TBW), pleaded guilty on April 1 to making false statements and conspiring to commit bank and wire fraud for his role in a $1.5 billion fraud scheme that contributed to the failure of TBW.
Allen, 55, of Oakton, Va., pleaded guilty to a two-count criminal information before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Allen faces a maximum penalty of five years in prison for each count when he is sentenced on June 21.
According to a statement of facts submitted with his plea agreement, Allen joined TBW in 2003 as its CEO and reported directly to its chairman. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas , and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.
According to court records, shortly after Ocala Funding was established, Allen learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. Allen admitted that in an effort to cover up the hole and to mislead investors, he told a co-conspirator to produce reports that concealed the hole. He also admitted that he knew that these misleading reports were sent to Ocala Funding investors and other third parties.
Allen also admitted in court that he kept the chairman of TBW informed of the collateral shortfall, and that in the fall of 2008, Allen was told that the hole had been moved from Ocala Funding to Colonial Bank. At the time that TBW ceased operations, the hole was approximately $1.5 billion. According to court documents, as a result of the Ocala Funding fraud scheme, Freddie Mac, Colonial Bank and Ocala Funding investors believed they had an undivided ownership interest in thousands of the same mortgage loans.
Court records state that in March 2009, Allen was directed to approach a private equity investor to secure capital to meet a $300 million private capital requirement the U.S. Department of Treasury set for Colonial Bank to receive $553 million from the Troubled Assets Relief Program (TARP). Although Allen failed to secure the funding from the investor, he admitted in court that the TBW chairman represented to others that the investor was a $50 million participant and that the chairman diverted $5 million from Ocala Funding to an escrow account in the investor’s name. This deception caused Colonial Bank to falsely announce publicly it had met its $300 million capital raise contingency and to send a letter to the FDIC that all investors had met a 10 percent escrow deposit requirement. Colonial Bank never received any TARP funds.
In court April 1, Allen also admitted to making false statements in a letter he sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. In this letter, Allen omitted that the delay in submitting the financial data was attributed to concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank. Instead, Allen falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.
To date, five other individuals have pleaded guilty for their roles in this and related fraud schemes.
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. It was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.
The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor F. O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.
Source: U.S. Department of Justice (4/1/11)
Allen, 55, of Oakton, Va., pleaded guilty to a two-count criminal information before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Allen faces a maximum penalty of five years in prison for each count when he is sentenced on June 21.
According to a statement of facts submitted with his plea agreement, Allen joined TBW in 2003 as its CEO and reported directly to its chairman. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas , and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.
According to court records, shortly after Ocala Funding was established, Allen learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. Allen admitted that in an effort to cover up the hole and to mislead investors, he told a co-conspirator to produce reports that concealed the hole. He also admitted that he knew that these misleading reports were sent to Ocala Funding investors and other third parties.
Allen also admitted in court that he kept the chairman of TBW informed of the collateral shortfall, and that in the fall of 2008, Allen was told that the hole had been moved from Ocala Funding to Colonial Bank. At the time that TBW ceased operations, the hole was approximately $1.5 billion. According to court documents, as a result of the Ocala Funding fraud scheme, Freddie Mac, Colonial Bank and Ocala Funding investors believed they had an undivided ownership interest in thousands of the same mortgage loans.
Court records state that in March 2009, Allen was directed to approach a private equity investor to secure capital to meet a $300 million private capital requirement the U.S. Department of Treasury set for Colonial Bank to receive $553 million from the Troubled Assets Relief Program (TARP). Although Allen failed to secure the funding from the investor, he admitted in court that the TBW chairman represented to others that the investor was a $50 million participant and that the chairman diverted $5 million from Ocala Funding to an escrow account in the investor’s name. This deception caused Colonial Bank to falsely announce publicly it had met its $300 million capital raise contingency and to send a letter to the FDIC that all investors had met a 10 percent escrow deposit requirement. Colonial Bank never received any TARP funds.
In court April 1, Allen also admitted to making false statements in a letter he sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009. In this letter, Allen omitted that the delay in submitting the financial data was attributed to concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank. Instead, Allen falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.
To date, five other individuals have pleaded guilty for their roles in this and related fraud schemes.
The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia. It was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.
The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor F. O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.
Source: U.S. Department of Justice (4/1/11)
Former Bank President, Loan Officer Indicted
ATLANTA – 3/21/2011 – An indictment unsealed on March 21 charges two former top officers of FirstCity Bank of Stockbridge, Ga., Mark A. Conner, 44, formerly of Canton, Ga., and Clayton A. Coe, 44, of McDonough, Ga., with a variety of offenses including conspiracy to commit bank fraud and bank fraud in connection with misconduct at FirstCity Bank in the years before the bank’s seizure by state and federal authorities on March 20, 2009.
In addition to the conspiracy and bank fraud charges, the indictment charges Conner with conducting a continuing financial crimes enterprise at the bank between February 2006 and February 2008, during which Conner’s and his co-conspirators’ crimes allegedly generated over $5 million in unlawful gross proceeds.
A federal grand jury in Atlanta returned the sealed indictment against Conner and Coe on March 16, 2011. Conner was arrested on the charges and taken into custody by federal agents at Miami International Airport yesterday morning, the two-year anniversary of FirstCity Bank’s failure, upon his arrival in Miami from the Turks and Caicos Islands in the West Indies. Conner made his initial appearance today before a federal magistrate judge in Miami, who ordered Conner to be detained as a flight risk pending his transfer by Deputy U.S. Marshals from Miami to Atlanta for trial. A formal detention hearing will take place in Miami on Thursday, March 24, 2011, at 1:30 p.m. Coe’s initial appearance on the indictment in the Northern District of Georgia has not yet been scheduled.
“The entire country has felt the deep economic impact of failed banks. At the heart of this indictment is an abuse of power by key insiders, who are charged with tricking their own colleagues into approving millions of dollars in commercial loans to fund the defendants’ own personal business activities, and to enrich themselves at the bank’s expense,” said U.S. Attorney Sally Quillian Yates. “Along the way, these defendants also allegedly defrauded state and federal bank regulators and examiners, and at least ten other federally-insured banks in Florida and Georgia that invested in the fraudulent multi-million dollar loans.”
Internal Revenue Service (IRS) – Criminal Investigation Special Agent in Charge Reginael McDaniel said of the case, “Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with other people’s money. Those individuals who engage in this type of financial fraud should know they will not go undetected and will be held accountable.”
According to the charges and other information presented in court: Conner served in a variety of top positions at FirstCity Bank between 2004 and 2009, including as vice chairman of the board of directors, as a member of the banks’s loan committee, as president, and later as acting chairman and chief executive officer.
Coe served as a vice president and as FirstCity Bank’s senior commercial loan officer. While serving in these positions, Conner, Coe and their co-conspirators allegedly conspired to defraud FirstCity Bank’s loan committee and board of directors into approving multiple multi-million dollar commercial loans to borrowers who, unbeknownst to FirstCity Bank, were actually purchasing property owned by Conner or Coe personally.
The indictment charges that Conner, Coe and their co-conspirators misrepresented the essential nature, terms and underlying purpose of the loans and falsified documents and information presented to the loan committee and the Board of Directors. Conner, Coe and their co-conspirators then allegedly caused at least 10 other federally-insured banks to invest in, or “participate in” the fraudulent loans based on these and other fraudulent misrepresentations, shifting all or part of the risk of default to the other banks. Coe’s bonus compensation was tied to the origination of FirstCity Bank loans, including the fraudulent loans with which he and Conner allegedly assisted each other.
In the process of defrauding FirstCity Bank and the “participating” banks, Conner, Coe and their co-conspirators allegedly routinely misled federal and state bank regulators and examiners to conceal their unlawful scheme. They also unsuccessfully sought federal government assistance through TARP and engaged in other misconduct in an attempt to avoid seizure by regulators and prevent the discovery of their fraud.
The charge against Conner for conducting a continuing financial crimes enterprise carries a mandatory minimum sentence of 10 years in federal prison, a maximum sentence of life in prison, and a potential fine of up to $10 million. The conspiracy and bank fraud charges against Conner and Coe, and a remaining charge against Coe for fraudulently influencing the actions of a federally-insured bank, carry a maximum sentence of 30 years in prison and a potential fine of up to $1 million on each count. In determining the actual sentences for each defendant, the Court will consider the U.S. Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
“Today’s indictment marks yet another occasion where bank executives are alleged to have turned to criminal fraud in the midst of the financial crisis, including an attempt to obtain millions of dollars from the American taxpayer through the Troubled Asset Relief Program (TARP),” said Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (SIGTARP). “SIGTARP will continue to work with our law enforcement partners to bring those who engage in such crimes to justice.”
Members of the public are reminded that the indictment only contains charges. The defendant is presumed innocent of the charges and it will be the government's burden to prove the defendant’s guilt beyond a reasonable doubt at trial.
This case is being investigated by Special Agents of the FDIC, Office of Inspector General; the Office of the SIGTARP; the FBI; and the IRS – Criminal Investigation.
Assistant U.S. Attorneys Douglas W. Gilfillan and David M. Chaiken are prosecuting the case.
Source: U.S. Department of Justice release.
In addition to the conspiracy and bank fraud charges, the indictment charges Conner with conducting a continuing financial crimes enterprise at the bank between February 2006 and February 2008, during which Conner’s and his co-conspirators’ crimes allegedly generated over $5 million in unlawful gross proceeds.
A federal grand jury in Atlanta returned the sealed indictment against Conner and Coe on March 16, 2011. Conner was arrested on the charges and taken into custody by federal agents at Miami International Airport yesterday morning, the two-year anniversary of FirstCity Bank’s failure, upon his arrival in Miami from the Turks and Caicos Islands in the West Indies. Conner made his initial appearance today before a federal magistrate judge in Miami, who ordered Conner to be detained as a flight risk pending his transfer by Deputy U.S. Marshals from Miami to Atlanta for trial. A formal detention hearing will take place in Miami on Thursday, March 24, 2011, at 1:30 p.m. Coe’s initial appearance on the indictment in the Northern District of Georgia has not yet been scheduled.
“The entire country has felt the deep economic impact of failed banks. At the heart of this indictment is an abuse of power by key insiders, who are charged with tricking their own colleagues into approving millions of dollars in commercial loans to fund the defendants’ own personal business activities, and to enrich themselves at the bank’s expense,” said U.S. Attorney Sally Quillian Yates. “Along the way, these defendants also allegedly defrauded state and federal bank regulators and examiners, and at least ten other federally-insured banks in Florida and Georgia that invested in the fraudulent multi-million dollar loans.”
Internal Revenue Service (IRS) – Criminal Investigation Special Agent in Charge Reginael McDaniel said of the case, “Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with other people’s money. Those individuals who engage in this type of financial fraud should know they will not go undetected and will be held accountable.”
According to the charges and other information presented in court: Conner served in a variety of top positions at FirstCity Bank between 2004 and 2009, including as vice chairman of the board of directors, as a member of the banks’s loan committee, as president, and later as acting chairman and chief executive officer.
Coe served as a vice president and as FirstCity Bank’s senior commercial loan officer. While serving in these positions, Conner, Coe and their co-conspirators allegedly conspired to defraud FirstCity Bank’s loan committee and board of directors into approving multiple multi-million dollar commercial loans to borrowers who, unbeknownst to FirstCity Bank, were actually purchasing property owned by Conner or Coe personally.
The indictment charges that Conner, Coe and their co-conspirators misrepresented the essential nature, terms and underlying purpose of the loans and falsified documents and information presented to the loan committee and the Board of Directors. Conner, Coe and their co-conspirators then allegedly caused at least 10 other federally-insured banks to invest in, or “participate in” the fraudulent loans based on these and other fraudulent misrepresentations, shifting all or part of the risk of default to the other banks. Coe’s bonus compensation was tied to the origination of FirstCity Bank loans, including the fraudulent loans with which he and Conner allegedly assisted each other.
In the process of defrauding FirstCity Bank and the “participating” banks, Conner, Coe and their co-conspirators allegedly routinely misled federal and state bank regulators and examiners to conceal their unlawful scheme. They also unsuccessfully sought federal government assistance through TARP and engaged in other misconduct in an attempt to avoid seizure by regulators and prevent the discovery of their fraud.
The charge against Conner for conducting a continuing financial crimes enterprise carries a mandatory minimum sentence of 10 years in federal prison, a maximum sentence of life in prison, and a potential fine of up to $10 million. The conspiracy and bank fraud charges against Conner and Coe, and a remaining charge against Coe for fraudulently influencing the actions of a federally-insured bank, carry a maximum sentence of 30 years in prison and a potential fine of up to $1 million on each count. In determining the actual sentences for each defendant, the Court will consider the U.S. Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
“Today’s indictment marks yet another occasion where bank executives are alleged to have turned to criminal fraud in the midst of the financial crisis, including an attempt to obtain millions of dollars from the American taxpayer through the Troubled Asset Relief Program (TARP),” said Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program (SIGTARP). “SIGTARP will continue to work with our law enforcement partners to bring those who engage in such crimes to justice.”
Members of the public are reminded that the indictment only contains charges. The defendant is presumed innocent of the charges and it will be the government's burden to prove the defendant’s guilt beyond a reasonable doubt at trial.
This case is being investigated by Special Agents of the FDIC, Office of Inspector General; the Office of the SIGTARP; the FBI; and the IRS – Criminal Investigation.
Assistant U.S. Attorneys Douglas W. Gilfillan and David M. Chaiken are prosecuting the case.
Source: U.S. Department of Justice release.
Nine people indicted in major credit union collapse
CLEVELAND – 3/3/2011 - A 26-count indictment was filed against nine people accused of fraud that led to one of the largest credit union collapses in American history, the Department of Justice announced on March 2.
St. Paul Croatian Federal Credit Union in Eastlake, Ohio, went into conservatorship and then forced liquidation in April 2010. That resulted in a $170 million loss to the National Credit Union Share Insurance Fund, making it one of the worst failures in history, according to a subsequent audit.
“This was a major fraud perpetrated against shareholders, including by people whose job was to protect shareholders’ interests,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. “It constitutes self-dealing on the most outrageous scale. We are committed to prosecuting everyone involved in this scheme, whether they are senior management of a financial institution or someone who submitted false loan applications.”
Those charged, including their ages, residences and the charges filed against them are as follows:
The indictment alleges that Anthony Raguz was the chief operating officer of St. Paul and, in that capacity, he issued more than 1,000 fraudulent loans totaling more than $70 million to more than 300 account holders at St. Paul from 2000 to April 2010.
“The St. Paul Federal Credit Union collapse resulted in one of the largest credit union failure ever investigated in U.S. history,” said Stephen D. Anthony, Special Agent in Charge of the FBI’s Cleveland office. “This complex, large-scale investigation transcended international borders and will continue until all those involved are brought to justice.”
The indictment also charges Raguz with corruptly accepting more than $500,000 in bribes, kickbacks and gifts from St. Paul customers who fraudulently obtained loans. The indictment further charges Raguz with four money laundering counts for issuing checks totaling $371,800 drawn on his St. Paul account payable to The Vanguard Group.
The indictment alleges that Koljo Nikolovski fraudulently obtained several loans from St. Paul and Raguz totaling approximately $2.9 million from 2003 through 2005 that were not repaid. The indictment further alleges that Nikolovski was aided and abetted on some of those loans by Rose Ann Nikolovski, his ex-wife, and the other individuals named in the indictment. Koljo Nikolovski was previously indicted in January on bank fraud and money laundering charges, and he is currently being held in pretrial detention.
The indictment also charges Koljo Nikolovski with fraudulently obtaining several additional loans in 2009 totaling $2.7 million and failing to repay those as well. The indictment further charges Nikolovski with corruptly giving Raguz $100,000 in exchange for Raguz approving and facilitating the fraudulent loans.
The indictment also charges Nikolovski with five counts of money laundering, including the purchase of two Mercedes Benz automobiles for about $99,000 and $60,000, and a wire transfer of $2.3 million to a bank account in Skopje, Macedonia. Nikolovski’s nephew, Marko Nikoli, is also charged with money laundering involving the purchase of the $60,000 Mercedes Benz. Rose Ann Nikolovski’s is charged with three money laundering counts.
If convicted, the defendants’ sentences will be determined by the court after review of factors unique to this case, including the defendants’ prior criminal records, if any, the defendants’ role in the offenses and the characteristics of the violations.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
This case is being prosecuted by Assistant U.S. Attorneys John D. Sammon and Bridget M. Brennan, following an investigation by the Cleveland Offices of the FBI and the IRS-CI, with the assistance of the Eastlake Police Department.
“It is Internal Revenue Service – Criminal Investigation’s responsibility when investigating financial institution fraud to focus on the flow of the money, which ultimately leads us to the beneficiaries of this illegal activity. This investigation cuts to the very core of the current economic crisis our nation faces,” said Jose A. Gonzales, IRS Special Agent in Charge.
Source: Finance Fraud Enforcement Task Force
St. Paul Croatian Federal Credit Union in Eastlake, Ohio, went into conservatorship and then forced liquidation in April 2010. That resulted in a $170 million loss to the National Credit Union Share Insurance Fund, making it one of the worst failures in history, according to a subsequent audit.
“This was a major fraud perpetrated against shareholders, including by people whose job was to protect shareholders’ interests,” said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio. “It constitutes self-dealing on the most outrageous scale. We are committed to prosecuting everyone involved in this scheme, whether they are senior management of a financial institution or someone who submitted false loan applications.”
Those charged, including their ages, residences and the charges filed against them are as follows:
| DEFENDANT | AGE | ADDRESS | CHARGES |
| Anthony Raguz | 51 | Mentor, Ohio | One count bank fraud, One count bank bribery, Four counts money laundering |
| Koljo Nikolovski | 48 | Eastlake, Ohio | 10 counts bank fraud, Three counts bank bribery, Five counts money laundering |
| Rose Ann Nikolovski | 48 | Eastlake | Seven counts bank fraud, Three counts money laundering |
| Marko Nikoli | 33 | Eastlake | Two counts bank fraud, One count money laundering |
| John Cendol, Jr. | 48 | Kirtland, Ohio | One count bank fraud |
| Ruth Cendol | 55 | Kirtland | One count bank fraud |
| Daniel Kocher | 72 | Euclid, Ohio | One count bank fraud |
| Edward Watral | 37 | Creston, Ohio | One count bank fraud |
| Jennifer Cerjan | 33 | Orrville, Ohio | One count bank fraud |
“The St. Paul Federal Credit Union collapse resulted in one of the largest credit union failure ever investigated in U.S. history,” said Stephen D. Anthony, Special Agent in Charge of the FBI’s Cleveland office. “This complex, large-scale investigation transcended international borders and will continue until all those involved are brought to justice.”
The indictment also charges Raguz with corruptly accepting more than $500,000 in bribes, kickbacks and gifts from St. Paul customers who fraudulently obtained loans. The indictment further charges Raguz with four money laundering counts for issuing checks totaling $371,800 drawn on his St. Paul account payable to The Vanguard Group.
The indictment alleges that Koljo Nikolovski fraudulently obtained several loans from St. Paul and Raguz totaling approximately $2.9 million from 2003 through 2005 that were not repaid. The indictment further alleges that Nikolovski was aided and abetted on some of those loans by Rose Ann Nikolovski, his ex-wife, and the other individuals named in the indictment. Koljo Nikolovski was previously indicted in January on bank fraud and money laundering charges, and he is currently being held in pretrial detention.
The indictment also charges Koljo Nikolovski with fraudulently obtaining several additional loans in 2009 totaling $2.7 million and failing to repay those as well. The indictment further charges Nikolovski with corruptly giving Raguz $100,000 in exchange for Raguz approving and facilitating the fraudulent loans.
The indictment also charges Nikolovski with five counts of money laundering, including the purchase of two Mercedes Benz automobiles for about $99,000 and $60,000, and a wire transfer of $2.3 million to a bank account in Skopje, Macedonia. Nikolovski’s nephew, Marko Nikoli, is also charged with money laundering involving the purchase of the $60,000 Mercedes Benz. Rose Ann Nikolovski’s is charged with three money laundering counts.
If convicted, the defendants’ sentences will be determined by the court after review of factors unique to this case, including the defendants’ prior criminal records, if any, the defendants’ role in the offenses and the characteristics of the violations.
An indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
This case is being prosecuted by Assistant U.S. Attorneys John D. Sammon and Bridget M. Brennan, following an investigation by the Cleveland Offices of the FBI and the IRS-CI, with the assistance of the Eastlake Police Department.
“It is Internal Revenue Service – Criminal Investigation’s responsibility when investigating financial institution fraud to focus on the flow of the money, which ultimately leads us to the beneficiaries of this illegal activity. This investigation cuts to the very core of the current economic crisis our nation faces,” said Jose A. Gonzales, IRS Special Agent in Charge.
Source: Finance Fraud Enforcement Task Force
Former Bank President Guilty of Embezzlement
Antonucci is First Defendant Ever Convicted of Fraud Against the Nation's Troubled Asset Relief Program; Faces Up To 135 Years
NEW YORK – 10/12/10 - Charles J. Antonucci, Sr., former president and CEO of The Park Avenue Bank, pleaded guilty in Manhattan federal court on Oct. 8 to multiple criminal charges, including fraud, bribery and embezzlement.
The announced was made jointly by U.S. Attorney for the Southern District of New York Preet Bharara, Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofsky, Superintendent of the Banks of New York (NYSBD) Richard Neiman, Special Agent-in-Charge of the New York Homeland Security Investigations office James Hayes, Jr., Assistant Director-in-Charge of the FBI New York office Janice Fedarcyk and Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG) Jon Rymer.
The charges to which Antonucci pleaded guilty include securities fraud relating to Antonucci’s attempt to fraudulently obtain more than $11 million worth of taxpayer rescue funds from the Troubled Asset Relief Program (TARP), bank bribery, embezzlement of bank funds, and participating in a $37.5 million scheme that left an Oklahoma insurance company in receivership.
"In March, Charles Antonucci become the first defendant charged with attempting to steal from the taxpayers' investment in TARP. Today, he becomes the first to be convicted. Today's plea marks an important chapter and demonstrates that SIGTARP and its law enforcement partners will ensure that would-be wrongdoers who seek to profit criminally from this historic program will be caught, charged, and brought to justice," Barofsky's said.
According to the complaint previously filed in Manhattan federal court, statements made during the guilty plea proceeding and other information in the public record, The Park Avenue Bank was a federally-insured and state-chartered bank that was headquartered at 460 Park Avenue, New York, New York, with retail branches in Manhattan and Brooklyn. The bank's clients consisted primarily of small businesses, for whom the bank made loans, extended lines of credit, and maintained depository accounts. As of the end of 2009, the bank had approximately $500 million on deposit, and over $520 million in assets. Antonucci served as president and CEO of The Park Avenue Bank from June 2004 to October 2009, and also served on its Board of Directors.
"Over the past few years, New York has seen too many cases of unscrupulous individuals using their positions at financial institutions for their own personal gain, leaving a shaken financial system in their wake. Charles Antonucci used his role at a state-chartered bank to defraud TARP and the system it was meant to stabilize," Superintendent of Banks and Member of the TARP Congressional Oversight Panel Richard Neiman said. "I am particularly proud of our bank examiners and Criminal Investigations Bureau for their diligence and persistence in substantiating this fraud, and the cooperative efforts of the state and federal agencies that contributed to today's resolution."
On March 12, 2010, the NYSBD seized the offices, branches, and assets of the bank, citing ineffective management and inadequate capital, and immediately appointed the FDIC as receiver. Three days later, on March 15, 2010, federal authorities arrested Antonucci at his home in Fishkill, N.Y., for engaging in a broad range of illegal conduct that contributed, in part, to the bank’s demise.
With his guilty plea, Antonucci became the first defendant convicted of fraud on the TARP, a program whose purpose was to provide funds to viable financial institutions to stabilize and strengthen the nation's financial system, and to enable those financial institutions to increase the flow of financing to U.S. businesses and consumers.
TARP funds were made available to qualifying banks; one of the critical elements of the TARP qualification process was the capital position of the applicant bank, which was evaluated by the FDIC as one of the bank’s regulators. Among other things, Antonucci misled the FDIC and NYSBD by misrepresenting the source of millions of dollars of money that he claimed to have invested in the bank out of his own pocket to recapitalize the bank. He then attempted to use that sham recapitalization to fraudulently obtain over $11 million in TARP funds by convincing the bank’s regulators that Antonucci had recapitalized the bank when, in fact, he had not.
Specifically, Antonucci pleaded guilty in count one of the information to deceiving the FDIC and NYSBD by falsely stating that he had invested $6.5 million of his own funds into the bank. Instead, Antonucci had engaged in a complicated round-trip loan transaction in which he merely borrowed from the bank itself the funds that he purportedly invested in the bank, meaning that the bank received no additional capital from the transaction. When the bank’s regulators began investigating the source of the purported $6.5 million capital infusion, Antonucci lied to them about the true nature of the transaction.
Antonucci also pleaded guilty to engaging in fraud in connection with the offer and sale of securities relating to the bank’s application for TARP funds through the Capital Purchase Program. As charged in count two of the information and in the complaint, Antonucci tried to induce the U.S. Government to provide TARP funds in exchange for securities issued by the bank by misrepresenting the bank’s capital position. In furtherance of this scheme, Antonucci fraudulently used the round trip transaction to support his application, in, among other things, telephone calls to FDIC regulators reviewing the bank’s TARP application, and falsely represented that his purported substantial, personal capital contribution to the bank should factor in favor of the bank’s TARP application.
Again, the supposed personal contribution by Antonucci was actually money loaned by the bank itself. Ultimately, the bank’s application for an $11,252,480 investment from TARP was denied.
Antonucci also pleaded guilty to a pattern of self-dealing and accepting bribes to influence his decisions as the president and CEO of the bank. For example, as charged in count three of the information and described in the complaint, Antonucci accepted bribes from customers of the bank, including but not limited to over $250,000 in cash bribes, free use of a customer’s airplane, and free use of another customer’s luxury automobile, in exchange for Antonucci’s approval of various banking transactions. Indeed, on more than ten occasions in 2008 and 2009, Antonucci used a private plane owned by a co-conspirator (CC-1) to fly to, among other places, Florida, Panama, Arizona (so that Antonucci could attend the Super Bowl) and Augusta, Ga., (so that Antonucci could attend the Masters Golf Tournament).
All the while, Antonucci approved over $8 million in overdrafts on accounts for entities controlled by CC-1 at Park Avenue Bank.
In addition to this self-dealing, Antonucci pleaded guilty to personally embezzling and misappropriating bank funds, as charged in count four of the information. Among other things, Antonucci approved a $400,000 loan through the bank to an entity he controlled called Easy Wealth, through which Antonucci obtained tens of thousands of dollars in proceeds. Antonucci also had the bank pay rent to him for one or more properties that he owned and which the bank did not use, including a property in Fishkill, N.Y., and directed bank employees to perform substantial work on non-bank matters in which he had personal financial interests.
To hide and repay a $2.3 million loan that was part of the fraudulent round-trip loan transactions described above, between June and October 2008, Antonucci and his co-conspirators engaged in a series of sham transactions using the funds of another Park Avenue Bank depositor, General Employment Enterprise, Inc. (GEE). As charged in count five of the information, to hide these transactions from GEE’s auditors, Antonucci caused a counterfeit certificate of deposit (CD) to be created by Park Avenue Bank, making it appear that GEE’s $2.3 million had been invested in a 90-day CD at the bank.
In fact, and as Antonucci well knew, there was no CD, and the $2.3 million was wire transferred from GEE’s account into an account controlled by Antonucci, which was then used to repay a loan. Later, when GEE’s auditors requested certification from Park Avenue Bank that the CD existed, Antonucci fraudulently signed that certification, when he knew that no CD in fact existed.
Further, from July 2008 through November 2009, as charged in count six of the information, Antonucci conspired with others to defraud the state of Oklahoma Insurance Department in connection with the $37.5 million sale of an insurance company that was later placed in receivership. In connection with this, Antonucci made various false statements to the Oklahoma Insurance Department regarding the financial state of the insurance company.
As part of his guilty plea, Antonucci also admitted the $44 million in forfeiture allegations in the Information, and reached an agreement with the government to pay an $11.2 million money judgment and forfeit various assets owned by him.
Antonucci, 59, faces a maximum sentence of 135 years in prison on the charges to which he pleaded guilty. He is scheduled to be sentenced by the U.S. District Judge Naomi Buchwald on April 8, 2011.
Antonucci resigned as president and CEO of the bank in November 2009.
"The TARP fund was designed to strengthen American financial institutions during unprecedented economic difficulties. Mr Antonucci devised a scheme to subvert federal banking laws at the taxpayers expense, exploiting a soft economy for his own personal gain. ICE, through its El Dorado Task Force, will continue to work to expose this type of financial duplicity that poses a significant risk to the stability of banks and other institutions that are of critical importance to the American economy," HSI Special Agent-in-Charge James T. Hayes, Jr., said:
Following the NYSBD’s seizure of the bank on March 12, 2010, the FDIC, as receiver entered into a purchase and assumption agreement with Valley National Bank, Wayne, N.J. Valley National Bank assumed all deposits and certain assets of Park Avenue Bank, except certain brokered deposits, which are being paid out by the FDIC.
Bharara praised the investigative work of SIGTARP, the NYSBD and its Criminal Investigations Bureau, HSI, the FBI, the FDIC-OIG, and New York High Intensity Financial Crime Area. Mr. Bharara added that the investigation is continuing.
The case is being handled by the Office’s Complex Frauds and Asset Forfeiture Units. Assistant U.S. Attorneys Lisa Zornberg, Zachary Feingold, Danya Perry, and Kan Min Nawaday are in charge of the prosecution.
"Charles Antonucci committed serious crimes, including flagrant self-dealing, but perhaps the most offensive affront to taxpayers was his admitted attempt to defraud TARP. The FBI is determined to ensure the integrity of a program created to strengthen the financial system, not line the pockets of swindlers," FBI Assistant Director-in-Charge Janice K. Fedarcyk said.
This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which Bharara serves as Co-Chair of the Securities and Commodities Fraud Working Group and Barofsky serves as Co-Chair of the Rescue Fraud Working Group.
Source: Financial Fraud Enforcement Task Force
NEW YORK – 10/12/10 - Charles J. Antonucci, Sr., former president and CEO of The Park Avenue Bank, pleaded guilty in Manhattan federal court on Oct. 8 to multiple criminal charges, including fraud, bribery and embezzlement.
The announced was made jointly by U.S. Attorney for the Southern District of New York Preet Bharara, Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofsky, Superintendent of the Banks of New York (NYSBD) Richard Neiman, Special Agent-in-Charge of the New York Homeland Security Investigations office James Hayes, Jr., Assistant Director-in-Charge of the FBI New York office Janice Fedarcyk and Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG) Jon Rymer.
The charges to which Antonucci pleaded guilty include securities fraud relating to Antonucci’s attempt to fraudulently obtain more than $11 million worth of taxpayer rescue funds from the Troubled Asset Relief Program (TARP), bank bribery, embezzlement of bank funds, and participating in a $37.5 million scheme that left an Oklahoma insurance company in receivership.
"In March, Charles Antonucci become the first defendant charged with attempting to steal from the taxpayers' investment in TARP. Today, he becomes the first to be convicted. Today's plea marks an important chapter and demonstrates that SIGTARP and its law enforcement partners will ensure that would-be wrongdoers who seek to profit criminally from this historic program will be caught, charged, and brought to justice," Barofsky's said.
According to the complaint previously filed in Manhattan federal court, statements made during the guilty plea proceeding and other information in the public record, The Park Avenue Bank was a federally-insured and state-chartered bank that was headquartered at 460 Park Avenue, New York, New York, with retail branches in Manhattan and Brooklyn. The bank's clients consisted primarily of small businesses, for whom the bank made loans, extended lines of credit, and maintained depository accounts. As of the end of 2009, the bank had approximately $500 million on deposit, and over $520 million in assets. Antonucci served as president and CEO of The Park Avenue Bank from June 2004 to October 2009, and also served on its Board of Directors.
"Over the past few years, New York has seen too many cases of unscrupulous individuals using their positions at financial institutions for their own personal gain, leaving a shaken financial system in their wake. Charles Antonucci used his role at a state-chartered bank to defraud TARP and the system it was meant to stabilize," Superintendent of Banks and Member of the TARP Congressional Oversight Panel Richard Neiman said. "I am particularly proud of our bank examiners and Criminal Investigations Bureau for their diligence and persistence in substantiating this fraud, and the cooperative efforts of the state and federal agencies that contributed to today's resolution."
On March 12, 2010, the NYSBD seized the offices, branches, and assets of the bank, citing ineffective management and inadequate capital, and immediately appointed the FDIC as receiver. Three days later, on March 15, 2010, federal authorities arrested Antonucci at his home in Fishkill, N.Y., for engaging in a broad range of illegal conduct that contributed, in part, to the bank’s demise.
With his guilty plea, Antonucci became the first defendant convicted of fraud on the TARP, a program whose purpose was to provide funds to viable financial institutions to stabilize and strengthen the nation's financial system, and to enable those financial institutions to increase the flow of financing to U.S. businesses and consumers.
TARP funds were made available to qualifying banks; one of the critical elements of the TARP qualification process was the capital position of the applicant bank, which was evaluated by the FDIC as one of the bank’s regulators. Among other things, Antonucci misled the FDIC and NYSBD by misrepresenting the source of millions of dollars of money that he claimed to have invested in the bank out of his own pocket to recapitalize the bank. He then attempted to use that sham recapitalization to fraudulently obtain over $11 million in TARP funds by convincing the bank’s regulators that Antonucci had recapitalized the bank when, in fact, he had not.
Specifically, Antonucci pleaded guilty in count one of the information to deceiving the FDIC and NYSBD by falsely stating that he had invested $6.5 million of his own funds into the bank. Instead, Antonucci had engaged in a complicated round-trip loan transaction in which he merely borrowed from the bank itself the funds that he purportedly invested in the bank, meaning that the bank received no additional capital from the transaction. When the bank’s regulators began investigating the source of the purported $6.5 million capital infusion, Antonucci lied to them about the true nature of the transaction.
Antonucci also pleaded guilty to engaging in fraud in connection with the offer and sale of securities relating to the bank’s application for TARP funds through the Capital Purchase Program. As charged in count two of the information and in the complaint, Antonucci tried to induce the U.S. Government to provide TARP funds in exchange for securities issued by the bank by misrepresenting the bank’s capital position. In furtherance of this scheme, Antonucci fraudulently used the round trip transaction to support his application, in, among other things, telephone calls to FDIC regulators reviewing the bank’s TARP application, and falsely represented that his purported substantial, personal capital contribution to the bank should factor in favor of the bank’s TARP application.
Again, the supposed personal contribution by Antonucci was actually money loaned by the bank itself. Ultimately, the bank’s application for an $11,252,480 investment from TARP was denied.
Antonucci also pleaded guilty to a pattern of self-dealing and accepting bribes to influence his decisions as the president and CEO of the bank. For example, as charged in count three of the information and described in the complaint, Antonucci accepted bribes from customers of the bank, including but not limited to over $250,000 in cash bribes, free use of a customer’s airplane, and free use of another customer’s luxury automobile, in exchange for Antonucci’s approval of various banking transactions. Indeed, on more than ten occasions in 2008 and 2009, Antonucci used a private plane owned by a co-conspirator (CC-1) to fly to, among other places, Florida, Panama, Arizona (so that Antonucci could attend the Super Bowl) and Augusta, Ga., (so that Antonucci could attend the Masters Golf Tournament).
All the while, Antonucci approved over $8 million in overdrafts on accounts for entities controlled by CC-1 at Park Avenue Bank.
In addition to this self-dealing, Antonucci pleaded guilty to personally embezzling and misappropriating bank funds, as charged in count four of the information. Among other things, Antonucci approved a $400,000 loan through the bank to an entity he controlled called Easy Wealth, through which Antonucci obtained tens of thousands of dollars in proceeds. Antonucci also had the bank pay rent to him for one or more properties that he owned and which the bank did not use, including a property in Fishkill, N.Y., and directed bank employees to perform substantial work on non-bank matters in which he had personal financial interests.
To hide and repay a $2.3 million loan that was part of the fraudulent round-trip loan transactions described above, between June and October 2008, Antonucci and his co-conspirators engaged in a series of sham transactions using the funds of another Park Avenue Bank depositor, General Employment Enterprise, Inc. (GEE). As charged in count five of the information, to hide these transactions from GEE’s auditors, Antonucci caused a counterfeit certificate of deposit (CD) to be created by Park Avenue Bank, making it appear that GEE’s $2.3 million had been invested in a 90-day CD at the bank.
In fact, and as Antonucci well knew, there was no CD, and the $2.3 million was wire transferred from GEE’s account into an account controlled by Antonucci, which was then used to repay a loan. Later, when GEE’s auditors requested certification from Park Avenue Bank that the CD existed, Antonucci fraudulently signed that certification, when he knew that no CD in fact existed.
Further, from July 2008 through November 2009, as charged in count six of the information, Antonucci conspired with others to defraud the state of Oklahoma Insurance Department in connection with the $37.5 million sale of an insurance company that was later placed in receivership. In connection with this, Antonucci made various false statements to the Oklahoma Insurance Department regarding the financial state of the insurance company.
As part of his guilty plea, Antonucci also admitted the $44 million in forfeiture allegations in the Information, and reached an agreement with the government to pay an $11.2 million money judgment and forfeit various assets owned by him.
Antonucci, 59, faces a maximum sentence of 135 years in prison on the charges to which he pleaded guilty. He is scheduled to be sentenced by the U.S. District Judge Naomi Buchwald on April 8, 2011.
Antonucci resigned as president and CEO of the bank in November 2009.
"The TARP fund was designed to strengthen American financial institutions during unprecedented economic difficulties. Mr Antonucci devised a scheme to subvert federal banking laws at the taxpayers expense, exploiting a soft economy for his own personal gain. ICE, through its El Dorado Task Force, will continue to work to expose this type of financial duplicity that poses a significant risk to the stability of banks and other institutions that are of critical importance to the American economy," HSI Special Agent-in-Charge James T. Hayes, Jr., said:
Following the NYSBD’s seizure of the bank on March 12, 2010, the FDIC, as receiver entered into a purchase and assumption agreement with Valley National Bank, Wayne, N.J. Valley National Bank assumed all deposits and certain assets of Park Avenue Bank, except certain brokered deposits, which are being paid out by the FDIC.
Bharara praised the investigative work of SIGTARP, the NYSBD and its Criminal Investigations Bureau, HSI, the FBI, the FDIC-OIG, and New York High Intensity Financial Crime Area. Mr. Bharara added that the investigation is continuing.
The case is being handled by the Office’s Complex Frauds and Asset Forfeiture Units. Assistant U.S. Attorneys Lisa Zornberg, Zachary Feingold, Danya Perry, and Kan Min Nawaday are in charge of the prosecution.
"Charles Antonucci committed serious crimes, including flagrant self-dealing, but perhaps the most offensive affront to taxpayers was his admitted attempt to defraud TARP. The FBI is determined to ensure the integrity of a program created to strengthen the financial system, not line the pockets of swindlers," FBI Assistant Director-in-Charge Janice K. Fedarcyk said.
This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which Bharara serves as Co-Chair of the Securities and Commodities Fraud Working Group and Barofsky serves as Co-Chair of the Rescue Fraud Working Group.
Source: Financial Fraud Enforcement Task Force
Federal Reserve Report Contains Bright Spots
srensberry@rensberrypublishing.com
(RPC) - 7/28/2010 - The recent Beige Book report by the U.S. Federal Reserve was a mixed bag of economic ups and downs, weak spots and bright spots. The report tabulates data over the past two months from the 12 District banks, among them the Federal Reserve Bank in St. Louis. In general, the catch phrases were: slow growth, sluggishness, flat or weak activity in the construction and housing sectors, and uncertainty.
"The economic outlook remains unusually uncertain," Federal Reserve Chairman Ben Bernanke said.
But where there has been weakness in some areas, like housing and construction, there has been grown in other areas and stability in still others. And is it uncertainty or simply "continued caution" on the part of consumers in the face of a decade of rising energy and health care costs, the foreclosure crisis, and turmoil on Wall Street of the likes that hasn't been seen in decades.
Still, the report on the Fed's Eighth District does have some bright spots, with the economy showing at least some overall improvement and growth, manufacturing and the services sector included.
Here's the Federal Reserve Board's July 28 summary of activity within its Eighth District:
The Federal Reserve's Eighth District - St. Louis
Economic conditions in the Eighth District have continued to improve since our previous report. Manufacturing activity increased, on balance, as did activity in the services sector. Auto sales increased over a year ago. Residential real estate market conditions continued to improve across the District's largest metropolitan areas, while commercial and industrial real estate markets remained weak, especially construction. Overall lending activity at a sample of small and mid-sized banks in the District decreased from early April to late June.
Manufacturing and Other Business Activity
Manufacturing activity has continued to increase since our previous report. Several manufacturers reported plans to open plants and expand operations in the near future, while a smaller number of contacts reported plans to close plants and reduce operations. Firms in the furniture, plastics product, metal pipe, and plastics resin manufacturing industries announced plans to expand operations and hire new employees. Additionally, a major firm in the automobile manufacturing industry announced the opening of a new production facility. In contrast, firms in the motor and generator, furniture, and polystyrene foam product manufacturing industries announced that they will close plants in the District and lay off workers.Activity in the District's services sector has also increased since our previous report. A major software publishing firm has announced plans to open a new facility in the District and hire new workers. Additionally, a firm in nursing care services announced plans to relocate their headquarters to the District. In contrast, contacts in education services, air transportation support services, and the casino industry announced plans to decrease operations and lay off workers. Sales of new and used automobiles in recent weeks were reported as higher than a year ago and slightly above expectations.
Real Estate and Construction
Home sales continued to improve throughout the Eighth District. Compared with the same period in 2009, May 2010 year-to-date home sales were up 3 percent in Memphis, 12 percent in St. Louis, 19 percent in Little Rock, and 30 percent in Louisville. Residential construction also continued to improve throughout the District. May 2010 year-to-date single-family housing permits were up in most District metro areas compared with the same period in 2009. Permits increased 27 percent in Louisville, 31 percent in Little Rock, 36 percent in St. Louis, and 52 percent in Memphis.Commercial and industrial real estate market activity remained slow throughout most of the District. Contacts noted that financing requirements for new construction remained stringent and lease rates remained low. A contact in St. Louis reported that commercial leasing was up in some areas, but new commercial construction projects are not expected before mid-2011. Industrial real estate and construction contacts throughout the District continued to report a flat environment. A contact in Louisville reported that demand for industrial real estate continued to be weak. A contact in the Memphis area reported that while industrial leasing has improved somewhat, no new industrial construction is likely before the end of the year.
Banking and Finance
Total loans outstanding at a sample of small and mid-sized District banks decreased 2.0 percent from early April to late June. Real estate lending, which accounts for 73.6 percent of total loans, decreased 1.9 percent. Commercial and industrial loans, accounting for 16.0 percent of total loans, decreased 2.5 percent. Loans to individuals, accounting for 5.3 percent of total loans, decreased 6.5 percent. All other loans, roughly 5.1 percent of total loans, increased 4.1 percent. During this period, total deposits at these banks decreased 1.2 percent.
Agriculture and Natural Resources
Generally, development of the District's major crops remained ahead of its 5-year average pace. In mid-July, the overall condition of rice and cotton was rated as slightly better than last year, while the condition of corn, sorghum, and soybeans was rated as slightly worse. Farmers in the District states planned to harvest more acres of corn for grain and rice in 2010 than in 2009 but fewer acres of soybeans and sorghum for grain. The winter wheat harvest was complete or nearly complete in all District states. Based on July estimates, total winter wheat production in the District states was expected to be down 48 percent from last year. Since our previous report, pasture conditions deteriorated in most District states
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