Search This Blog

Friday, June 28, 2013

Arizona executives sentenced in ND bank fraud case

Two executives from a defunct Arizona mortgage lender received drastically different federal prison sentences Friday for swindling North Dakota-based BNC National Bank out of at least $26 million at a time when financial institutions were reeling from the national mortgage crisis.

Scott Powers and David McMaster pleaded guilty in October to conspiracy to commit bank fraud and wire fraud. Powers was the CEO of American Mortgage Specialists Inc., or AMS, and McMaster was the company's vice president in charge of lending operations.

In separate sentencing hearings in Bismarck, U.S. District Judge Daniel Hovland gave McMaster 15 years and six months in prison, and Powers eight years. Several employees from the bank were at the hearings.

Powers reportedly was given credit for cooperating with authorities. McMaster's lawyer said his client owned up to the charges and deserved better.

"I am hopeful that the BNC people have closure, but I am disappointed in the sentence," McMaster's defense attorney James Belanger told The Associated Press. "David McMaster took responsibility for his actions, agreed to plead guilty, and knew that he would face a term in prison."

The length of McMaster's sentence undermines the concept of responsibility in criminal cases and "underscores the irrationality" of federal sentencing guidelines, Belanger said.

Powers' attorney, Patrick Sampair, was not immediately available for comment.

Authorities say AMS defrauded the bank by providing it with false financial statements and other information about the status of loans the bank had financed. A printout obtained by a BNC employee in April 2010 showed that about $565,000 of loans remained to be sold, rather than the approximately $27 million of loans shown as being held for sale to investors.

Documents show that BNC's holding company received about $20 million from the federal Troubled Asset Relief Program, or TARP, in January 2009. About $18 million of that went to the bank. Investigators say BNC did not make its required TARP dividend payments to the government between February 2010 and December 2011.

At that point, BNC ceased funding the loans, and AMS shut its doors.

"Mr. McMaster and Mr. Powers stole $28 million from BNC banks, putting the jobs of the people who work there at risk," U.S. Attorney Timothy Purdon said. "Further, because of the TARP payments BNC had received, they also put the American taxpayer at risk."

The plea agreements call for Powers and McMaster to pay back more than $28.5 million to the government and more than $28.5 million to the bank.

Two other people were indicted in the case. Lauretta Horton, former director of accounting with AMC, and David Kaufman, an independent auditor, pleaded guilty and were sentenced to probation. Horton was charged with conspiracy to commit bank and wire fraud. Kaufman was charged with obstruction of justice.

BNS is based in Bismarck with offices in several states, including Arizona. Bank CEO Gregory Cleveland did not return a phone message Friday.

No comments:

Post a Comment