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Wednesday, August 28, 2013

Bank exec busted for bailout fraud in Missouri


 No matter how one might feel about the 2009 bank bailouts, there is one thing I think we can all agree on: Bank executives shouldn't have used TARP money to buy themselves luxury vacation condos.
But that's exactly what Missouri banker Darryl Layne Woods has admitted to having done.
Woods today plead guilty in federal court to having lied to investigators over his use of $381,000 in bailout funds to purchase a waterfront condo in Fort Myers, Fla.
The money was part of nearly $1.04 million provided by the U.S. Treasury Department to Calvert Financial, the holding company for Ashland, Mo.-based Mainstreet Bank. Woods was chairman, president and majority shareholder of Calvert, plus chairman and chief financial officer of Mainstreet Bank.
TARP recipients were required to disclose how the bailout funds were used, but it seems that Woods apparently left out the part about his waterfront hideaway. Probably because it was an illegal misuse of funds. Not surprisingly, he misled federal investigators about the situation when later questioned (until copping to everything today).
He faces up to one year in prison without parole, plus a fine of up to $100,000 and an order of restitution. He also is banned from the financial services business for life.

Thursday, August 22, 2013

Former Citibank employee pleads not guilty to identity theft in South Dakota

A former Citibank employee accused of using customer cards to pay personal bills has pleaded not guilty to bank fraud, identity theft and embezzlement charges.

Terri Jo Huber, 43, appeared in U.S. District Court of South Dakota on Wednesday afternoon, pleaded not guilty to nine criminal counts and was released on her own recognizance.

An indictment against Huber, filed last week, says she worked as an escalation specialist for Citibank. The position gave her access to customer credit card information, which allowed her to alter customer address and notification information after using their cards.

Huber was charged with bank fraud, embezzlement, access device fraud and six counts of aggravated identity theft. The first two charges carry maximum sentences of 30 years, while device fraud is punishable by up to 15 years and each count of identity theft carries a mandatory 2-year sentence.

The indictment says Huber stole the identities of at least four people between November of 2011 and November 2012.

Citibank released a statement on Huber’s employment on Wednesday.

"Her employment was terminated in November 2012. She handled customer service inquiries. Upon discovering the matter, we immediately notified the authorities and terminated her employment. We also notified and took steps to protect the customers involved. Consistent with legal requirements, our customers are not liable for any unauthorized use of their accounts.”

Tuesday, August 20, 2013

Former bank officer to plead guilty to defrauding Rockland Savings of more than $400,000 in Maine

A 45-year-old Rockland woman is scheduled to plead guilty Tuesday to a charge that she bilked the Rockland Savings Bank of more than $400,000 over a three-year period.

The U.S. Attorney’s Office and Shauna L. Quinn filed an agreement Aug. 8 in U.S. District Court that Quinn would plead guilty to bank fraud.

Quinn could face up to 30 years in federal prison although the agreement points out that the prosecution is recommending that U.S. District Court Judge George Singal find that Quinn cooperated with authorities and thus should be given a lesser sentence. The judge, however, does not have to accept that recommendation.

The U.S. Attorney’s Office, through Assistant U.S. Attorney James Chapman Jr., states in paperwork filed Thursday that if the case had gone to trial, the federal government would have proved that between July 2008 and June 2011, she came up with a scheme to defraud Rockland Savings of more than $400,000.

The scheme, according to the federal government, involved extending home equity lines of credit and loans in the names of family members and then using that money for her personal use, for the use of family members, and to make payments on loans. The lines of credit and loans were done without authorization of the bank or the family members, according to the prosecution.

Last year, Quinn’s brother, Christopher Wellman, and sister-in-law, Tara Wellman, both of Hope filed a civil lawsuit against the bank, claiming it allowed an employee to steal $95,000 from his accounts and took out a $68,000 loan in his name without his knowledge.

Maine Superior Court Justice Jeffrey Hjelm dismissed the bulk of that lawsuit in December.

Quinn was hired by Rockland Savings in August 2000 as a teller. She was promoted in October 2004 to a customer service representative and in May 2007 was transferred to the collections department. In 2008, she also was given the duty of processing loans.

The bank became aware of the scheme in June 2011 when it learned Quinn had deposited $5,000 into an account with her daughter’s name on it. The money was traced to a line of credit in the name of Quinn’s mother, according to the U.S. Attorney’s Office.

The bank reviewed transactions and found that within the previous 45 days, Quinn had transferred about $55,000 from her daughter’s account to her own account.

Bank officials confronted her on June 24, 2011, and she admitted to making unauthorized increases to lines of credit and creating unauthorized loans to family members.

She was immediately fired by the bank, the prosecution stated.

Quinn is represented by attorney Dale Thistle of Newport.

Quinn was charged in December and indicted by a federal grand jury in January. She was scheduled to go to trial next month.

Monday, August 19, 2013

Woman pleads not guilty to embezzling from Glacier Bank in Montana

A former Glacier Bank employee has pleaded not guilty to theft by embezzlement after allegedly taking $3,100 from the business.

Kristen Kleiv, 27, of Bigfork, entered the plea Thursday in Flathead District Court.
According to a court document, a till allegedly run by Kleiv was reported to be $3,100 short on March 15. An internal investigation at the bank allegedly showed Kleiv had been taking money from her till since Nov. 6, 2012. She had been an employee since October 2012.
During a later interview, Kleiv allegedly admitted taking $20 from her till several months ago, continuing to take more money over the next several months until she was caught. She allegedly admitted taking $3,100 total.
If convicted, Kleiv faces up to 10 years in prison, a fine of up to $50,000, and restitution to the bank. She is currently released on her own recognizance.
The next hearing in Kleiv’s case is set for Oct. 30.

Bank Teller Sentenced for Embezzling from Customer Accounts in Maryland

United States District Judge Paul W Grimm sentenced Irene Quansah, age 37, of Germantown, Maryland, today to two years in prison, followed by five years of supervised release, for embezzlement and income tax evasion. Judge Grimm also entered an order that Quansah forfeit and pay restitution of $144,908.33 to the victim bank and $30,000 to the IRS. The sentence was announced by United States Attorney for the District of Maryland Rod J Rosenstein; Special Agent in Charge Stephen E Vogt of the Federal Bureau of Investigation; Special Agent in Charge Thomas J Kelly of the Internal Revenue Service-Criminal Investigation, Washington, DC. Field Office.

“Ms. Quansah’s embezzlement scheme to steal from her employer’s customer bank accounts was illegal, and her act of deliberately underreporting her embezzlement income on her federal tax returns is unlawful,” said Thomas J Kelly, Special Agent in Charge, IRS-Criminal Investigation, Washington DC Field Office. “IRS-Criminal Investigation will continue to work with our law enforcement partners to bring to justice those that abuse their positions of trust and steal from innocent victims. Today’s sentencing is a reminder that there are detrimental consequences for this type of criminal behavior.” According to her plea, from November 2010 to July 2012, Quansah used her position as a teller coordinator at a bank to fraudulently withdraw funds from customers’ accounts and fail to deposit customer funds.

Specifically, on at least 100 occasions, Quansah removed cash from cash deposits made by a restaurant at an ATM, stealing a total of $35,696.29. On December 28, 2010, she withdrew $10,000 from the account of an elderly woman, returning the money from funds drawn off her teller vault only after the customer complained to bank officials about the unauthorized withdrawal. On five occasions from December 2010 to April 2011, Quansah withdrew a total of $11,550 from another elderly woman’s account, falsely noting that the fraudulent withdrawals were done at the customer’s request. In February 2011, the daughter of a third elderly woman presented savings bonds to Quansah to redeem and deposit the proceeds into the elderly mother’s account.

Quansah told the daughter that she needed to leave the bonds with her so that Quansah could redeem them over the next few months. Quansah, however, deposited only a portion of the proceeds of the bonds into the customer’s account, stealing at least $9,975.48. Similarly, in September 2011, Quansah was asked to redeem savings bonds valued at $25,179.48 and deposit the proceeds into another elderly woman’s account, but Quansah deposited only $13,342.92, retaining the remainder for her own benefit. On nine occasions from September 2011 to March 2012, Quansah stole a total of $65,850 from an elderly couple’s account, again falsely noting that the withdrawals were made at the couple’s request.

After the elderly man complained to bank officials about these unauthorized withdrawals, Quansah refunded the account using funds drawn off of a friend’s line of credit. About an hour later, Quansah debited her teller vault to repay her friend’s line of credit. On August 1, 2012, the bank made a surprise cash audit of Quansah’s cash drawer and teller vault which revealed a shortage of $87,900. Quansah admitted to taking the money.

The total amount Quansah embezzled was $144,908.33. She did not report any of the embezzled funds to the IRS on her tax returns and thus owed between $30,000 and $80,000 for underreporting her income. Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 United States attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.

Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit United States Attorney Rod J Rosenstein thanked the FBI and IRS-Criminal Investigation for their work in the investigation.

Mr Rosenstein praised Assistant United States Attorneys Christen A Sproule and Kelly O'Connell Hayes, who prosecuted the case.

Former loan manager arrested on felony racketeering charge in California

A former manager of Noble Finance was arrested on several felony charges Thursday. Police say Jennifer Echavarria, 26, of Carlsbad, is suspected of pocketing money deposited by as many as 35 customers of Noble Finance, where she worked as the loan manager.

Echavarria was arrested Thursday night at her home on one count of felony racketeering, 20 counts of forgery, five counts of fraud and 30 counts of embezzlement. Echavarria has been remanded to the Eddy County Detention Center with bond set at $50,000.

Carlsbad Police Department began an investigation in July in response to accusations of fraud and embezzlement after an internal audit revealed discrepancies in customer accounts.

According to the police department, 35 victims have been identified and investigators expect more to come forward.

Echavarria is suspected of pocketing cash deposits and generating unauthorized loans in customers' names during the months of June and July. It is believed she embezzled more than $7,000 of customer funds, and she issued them hand-written receipts.

Echavarria did not offer a statement to Carlsbad police detectives after her arrest. She is being represented by the Boyea Law Firm.

Anyone who believes they may have been a victim should contact Crime Stoppers of Eddy County

Wednesday, August 14, 2013

Bank employee arrested for embezzlement; faces up to 10 years in prison in Mississippi

An Oktibbeha County bank employee has been arrested for embezzling from her employer, according to Attorney General Jim Hood.

Ashley Smith, 28, of Columbus, was arrested by investigators with the Attorney General’s Public Integrity Division following indictment by an Oktibbeha County grand jury on one count of embezzlement.  The indictment charges Smith with embezzling over $30,000 while working for Cadence Bank in Starkville.

Smith was booked into the Oktibbeha County jail and released on bond. If convicted, she faces up to 10 years in prison.

Mason City woman charged with Northwood bank embezzlement

A former employee of Northwood State Bank has been charged in federal court with embezzling $69,000 from the bank.
Margaret Marie Sheese, 56, Mason City, is charged with one count of embezzlement by a bank employee.
According to a court document from the United States District Court for the Northern District of Iowa, between Oct. 3, 2011 and Jan. 15, 2013, Sheese fraudulently withdrew money from the bank for her own purposes.
Sheese will appear in federal court in Cedar Rapids on Aug. 16.

 A 53-year-old Mason City woman faces up to 30 years in prison after pleading guilty to embezzling nearly $70,000 from the bank where she worked.
Officials say Margaret Marie "Peggy" Sheese pleaded guilty Friday in federal court in Cedar Rapids to one count of embezzlement.
In a plea agreement, Sheese admitted to stealing $69,200 from Northwood State Bank in Mason City between about October 2011 and January while she was a teller at the bank.
Authorities say Sheese made 29 secret withdrawals from accounts belonging to a particular bank customer. Officials say she altered the bank's records so that the customer's bank statements were sent to a post office box belonging to Sheese.
Sheese also stole $2,000 in cash from the bank in January.

Sunday, August 11, 2013

Ex-Bank of Oswego, Oregon exec fights fraud charges

A former Bank of Oswego executive is facing charges in both state and federal courts.

Geoffrey S. Walsh is fighting criminal charges of wire fraud, engaging in monetary transactions with criminally derived property and making false statements on a loan application. He was indicted July 16 in U.S. District Court on allegations that he defrauded an investor starting in May 2012, right after he lost his job as vice president of business development and lending services at The Bank of Oswego.

The offenses carry maximum penalties of 20 to 30 years in prison, according to court records.

According to the indictment, an investor identified as H.S. loaned Walsh $500,000 without knowing Walsh had been fired and without knowing the money would be used for personal expenses rather than business purposes. Walsh allegedly said he would use the money to invest in the purchase of two condominiums, which he put up as collateral, when he actually already owned the condos and was in the process of selling them. He reportedly still owes the investor $200,000 as well as interest and penalties on the loan.

The indictment also accuses Walsh of making false statements on a loan application for bank customers as early as 2007, when he worked at the Lake Oswego branch of Golf Savings Bank, now Sterling Savings Bank.

The Bank of Oswego, meanwhile, is suing Walsh in Clackamas County Circuit Court.

The bank has accused Walsh of misappropriating trade secrets and is seeking an estimated $600,000 in damages.

According to the civil suit filed July 24, Walsh in September 2010 recommended the bank extend a $1.7 million line of credit to a trust overseen by Martin Kehoe for business investment purposes and operating expenses of two companies. The complaint alleges Kehoe, more commonly known as a prominent area real estate developer, used the money to make loans to existing customers of the bank — borrowing which could overextend those customers and put the bank’s loans at risk of default — and contends Walsh received loans from Kehoe’s companies. The line of credit’s maturity date was extended twice, through 2012.

The lawsuit also alleges Walsh and another former executive, Diana Yates, who resigned her position as executive vice president and chief financial officer in March 2012, kept bank clients’ confidential information to use for later financial and professional gain.

Walsh was fired May 2, 2012, because of “unacceptable banking practices,” according to the complaint, which includes excerpts from bank emails uncovered after Walsh was fired.

In one email sent to Walsh in April 2012, Kehoe said some of the bank’s customers who borrowed money from Onboard Capital, one of his companies, were failing to make payments on the hard-money loans and pushed for Walsh to either take properties backing those loans and immediately sell them, to provide the customers with alternative financing or to “squeeze them to pay me off.”

Kehoe said in the April email he was still making monthly payments on the credit lines but had reached an “emergency point” with the situation.

He contends he never loaned Walsh any money and Walsh simply facilitated the loans.

“We never paid him a fee, nor did he borrow money from us,” Kehoe said.

He said bank executives were aware he would use the line of credit to make hard-money loans. In addition, he contends the bank’s president and chief executive officer, Dan Heine, asked him to alter a financial statement to recategorize the types of loans he’d received.

Eventually, Kehoe said, “We paid off our credit lines and severed our relationship to the bank.”

Heine said the bank has a policy to not comment on pending litigation.

An attorney representing Walsh did not respond to a call seeking comment.

Neither Kehoe nor Yates is a defendant in the civil suit. Kehoe said he plans to file his own lawsuit against the bank, likely within the next month.

Thursday, August 8, 2013

Florida Bank Executives and Attorney Charged with Conspiracy, Wire Fraud, False Statements, and Making a False Claim Against the United States

Donald Terry Dubose, a/k/a Terry Dubose, 65, of Panama City Beach, Florida; Elwood Ladon West, a/k/a Woody West, 39 of Monroeville, Alabama; and Frank Alfred Baker, 61, of Marianna, Florida, have been charged for their roles in a fraud scheme involving the Federal Deposit Insurance Corporation’s (FDIC) Temporary Liquidity Guarantee Program (TLGP), announced U.S. Attorney Pamela C. Marsh for the Northern District of Florida. The TLGP was created at the height of the 2008 financial crisis in order to encourage lending but, according to the allegations, was misused by the defendants to shield themselves and their institution from financial losses.

The defendants were indicted by a federal grand jury with one count of conspiracy to commit wire fraud against the FDIC, seven counts of wire fraud, three counts of making false statements to the FDIC, and one count of aiding and abetting a false claim against the United States. A sealed indictment was returned by a federal grand jury on July 9, 2013, and unsealed today.

The indictment alleges that Coastal Community Investments (Coastal) was a bank-holding company that owned Coastal Community Bank, based in Panama City Beach, Florida, and Bayside Savings Bank, based in Port St. Joe, Florida. Coastal Community Bank and Bayside Savings Bank both failed on July 30, 2010. Dubose was the Chairman and Chief Executive Officer of Coastal and the second largest Coastal shareholder. West was the Chief Financial Officer of Coastal and a Coastal shareholder. Baker was an attorney for Coastal and Coastal’s largest shareholder.

The fraud alleged in the indictment involved the TLGP, which was created at the height of the financial crisis in October 2008. The purpose of the TLGP was to encourage banks to begin lending to one another again and, thereby, help stabilize the economy. To do this, the TLGP provided that the FDIC would guarantee a loan made by one financial institution (the “lender”) to another financial institution (the “borrower”) in an amount up to 125 percent of the borrower’s existing senior unsecured debt (outstanding-unsecured debt), thus assuring repayment to the lender by the borrower or, in the event of default, by the FDIC.

The indictment further alleges that, in October 2008, Coastal had a $3 million loan with RBC Bank (USA), which was secured by 100 percent of the stock of Coastal Community Bank and Bayside Savings Bank (the RBC Loan). At that time, the RBC Loan was in default, thus giving RBC the ability to exercise its right to take the pledged stock and potentially rendering defendants’ shares in Coastal worthless. Under pressure from RBC to repay this debt, the indictment alleges that the defendants falsely certified to the FDIC that the RBC Loan was unsecured, knowing that it was secured, so that Coastal could get an FDIC guaranteed loan under the TLGP.

The indictment further alleges that Coastal obtained a $3,750,000 (125 percent of the RBC Loan) loan from central Florida-based CenterState Bank, which—based on the defendants’ misrepresentations—was guaranteed by the FDIC under the TLGP (the TLGP Loan). Coastal used the proceeds of the TLGP Loan to repay the RBC Loan. In June 2010, Coastal defaulted on the TLGP Loan, and, on August 7, 2010, CenterState Bank filed a claim with the FDIC for payment of the full amount due on the TLGP Loan, plus interest. The FDIC paid CenterState’s claim on August 13, 2010 by wiring $3,805,833.34 in principal and interest from the FDIC to CenterState.

Finally, the indictment alleges that Dubose, desiring to avoid losses to himself and his family as Coastal’s financial condition deteriorated, fraudulently sold and converted Coastal stock owned by him and his family members to unwitting investors by misrepresenting the nature of the stock, by misrepresenting Coastal’s financial condition, and by providing loans from Coastal Community Bank to finance the purchases of Coastal stock.

Defendants are scheduled for to appear in federal court for their initial appearance and arraignment on August 8, 2013 at 1:30 p.m. at the U.S. District Courthouse in Panama City, Fla.

The defendants face a maximum of 30 years in prison for each count of conspiracy to commit wire fraud and wire fraud and a maximum of five years in prison for making false statements to the FDIC and aiding and abetting CenterState Bank in making a false claim against the United States.

This indictment results from an extensive investigation by agents of the Federal Reserve Board-Office of the Inspector General, FBI, FDIC, and Office of the Special Inspector General for the Troubled Asset Relief Program. The case is being prosecuted by Assistant U.S. Attorney Gayle Littleton.

An indictment is merely an allegation by a grand jury that a defendant has committed a violation of federal criminal law and is not evidence of guilt. All defendants are presumed innocent and entitled to a fair trial, during which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Tuesday, August 6, 2013

Officers at failed Wilmette, Illinois bank charged with fraud

Four former directors and officers of a failed Wilmette bank have been charged with defrauding the U.S. government, including using $6.8 million from the bank-bailout program to keep their alleged criminal enterprise running.

It’s the first time that a TARP bank has been charged with running a criminal enterprise, according to the governing body for the Troubled Asset Relief Program, or TARP. Records show other banks that received bailout money have previously been charged with fraud.

Zulfikar Esmail, 70, of Evanston, the bank’s former chairman, was among those formally arraigned today in Cook County Criminal Court for his role in the alleged scheme at $269 million-asset Premier Bank, which failed in March 2012.
The Federal Deposit Insurance Corp. estimated that its failure would cost the fund – which is financed by other banks -- $64 million. In January 2009, Premier received $6.8 million from the U.S. Treasury Department’s Troubled Asset Relief Program, which was supposed to go to only healthy banks. Among other things, the indictment said that the bank misrepresented its financial condition to regulators, making Treasury believe that it was healthier than it was.

Illinois Attorney General Lisa Madigan said Esmail engaged in a “criminal shakedown scheme, soliciting and demanding bribes in connection with applications made for business loans and lines of credit” to open and operate several Michael’s Fresh Market grocery stores in Chicago and the suburbs. The lawsuit, filed by the state of Illinois, alleges that Esmail demanded that his children be given ownership stakes in the stores in exchange for the loans.

Charges against Esmail include financial institution fraud, theft by deception, commercial bribery of a financial institution, and conspiracy to commit a financial crime. He faces a mandatory prison sentence for theft by deception and being organizer of a financial crimes enterprise, which each carry a mandatory prison sentence of six to 30 years. His remaining charges are punishable by four to 15 years.

Other defendants are Shamim Esmail, 65, of Evanston; Robert McCarty, 51, of Geneva; and William Brannin, 53, of Chicago. Charges against them include continuing a financial crimes enterprise and conspiracy to commit a financial crime, each punishable by four to 15 years in prison. They also face charges of theft by deception, which has a mandatory prison sentence of six to 30 years.

The Esmails have been released on a collective $500,000 bond, according to Illinois attorney general Lisa Madigan. McCarty was released on a $400,000 bond and Brannin on a $350,000 bond.

The four have separate lawyers.

“Shamim is not guilty of the charges in the indictment,” said her lawyer, Mark Rotert, of Stetler Duffy & Rotert in Chicago. “We intend to demonstrate that at trial and look forward to clearing her name.”

Attorneys for Brannin and Esmail also said their clients were innocent.

“If criminal cases were proved in press releases, the attorney general would be a champion, but they’re not,” said Chris Gair, the lawyer for Zulfikar Esmail, referring to Madigan's written statement.

The former chairman of failed Premier Bank in Wilmette, along with his wife and two other defendants, have been indicted in Cook County Criminal Court on fraud charges in what was described as the first case in the country accusing former bank officers and directors of running a "criminal enterprise" to defraud the federal bank bailout program.
Dr. Zulfikar Esmail, 70, of Evanston, a medical doctor who launched the bank in 2000, is charged with financial institution fraud and being the organizer of a financial crimes enterprise, according to the indictment, brought by Illinois Attorney General Lisa Madigan's office. If convicted, he faces mandatory jail time of six to 30 years.
Also charged were his wife Shamim Esmail, 65, and two board members: Robert McCarty, 51, of Geneva, and William Brannin, 53, of Chicago. They each face two sets of charges, one that would mandate prison time of six to 30 years and the other that would mean possible prison time of four to 15 years.
(Read the indictment at the end of this story.)
The four were arrested at their homes last month and released after posting bonds.
At his arraignment today, Dr. Esmail pleaded innocent, said his attorney, Chris Gair.
"There is no evidence of wrongdoing by Dr. Esmail and this is overreaching by the Illinois attorney general's office. We're going to be looking forward to establishing Dr. Esmail's innocence," Mr. Gair said.
Ms. Esmail's attorney, Mark Rotert, said "She isn't guilty of the charges in the indictment. She intends to defend herself and we're looking forward to clearing her name."
The Esmails were accused of defrauding the Treasury Department out of $6.8 million in bailout funds issued under the Troubled Asset Relief Program (TARP). In addition to the lost taxpayer funds, when Premier Bank failed last year, it cost the Federal Deposit Insurance Corp.'s insurance fund an estimated $64.1 million.
According to the indictment, the Esmails engineered a scheme to “shake down” one of the bank's biggest borrowers, requiring that he hand over equity interests in some of his projects to the Esmails' grown children as a condition for obtaining loans to expand.
George Dernis, former owner of the Michael's Fresh Market chain of grocery stores, had made similar allegations in a civil lawsuit he brought last year against the Esmails.
The indictment also accused the Esmails of concealing the condition of the bank from state banking regulators by, among other things, lending money to borrowers to buy out the failing projects of other borrowers. That enabled the bank not to have to disclose certain loans as delinquent on its quarterly reports of its financial condition.
Mr. Esmail also allegedly improperly charged the bank for construction work done on his home and some rental properties he owned, according to the indictment.
“Esmail, the former chairman of TARP recipient Premier Bank, stands charged of orchestrating a criminal enterprise by using Premier Bank as his personal fiefdom and of exploiting TARP to finance an alleged long-running criminal enterprise while fattening his own pockets at the expense of customers and federal taxpayers,” said Christy Romero, special inspector general for TARP, in a release.
In the release, Ms. Madigan said the defendants used “taxpayer funds to further their own shakedown scheme at a time when our country was on the brink of disaster.”
Also participating in the investigation was the FDIC's Office of Inspector General.
Attorneys for the other two defendants didn't respond to requests for comment.


One Bank's Scooter Stuart Thought He Knew Who Blew the Whistle in Arkansas


Before he died on March 26, Layton “Scooter” Stuart told Arkansas Business that he thought he knew who had stirred up trouble for him with the chief federal regulators of his One Bank & Trust: Michael Heald and Tom Ricciardone.

In August 2011, Stuart had fired Heald as One Bank’s executive vice president and chief operating officer and terminated the bank’s business relationship with Thinc Marketing Group, where Ricciardone was president.

According to Stuart, Heald told him: “I know where every skeleton is, and we’ll ruin your lives.”

After the Office of the Comptroller of the Currency forced the board of directors to oust Stuart from the bank last Sept. 28, Stuart said he received a text message from Ricciardone that started with “I told you we would get you” and ended with a particularly nasty expletive.

Federal agents have since revealed that three anonymous notes were sent to the OCC’s Little Rock field office, the first received on March 14, 2012. The three communications concerned questionable bank loans and fund transfers linked with two Little Rock houses owned by Stuart’s son and daughter.

Those notes prompted OCC scrutiny that exploded into a sweeping forensic audit of One Bank and a multi-agency criminal investigation led by the Internal Revenue Service.

No criminal charges have been made against anyone in connection with the One Bank investigation.

Heald didn’t return messages seeking comment, and Ricciardone declined comment. There is no evidence besides Stuart’s suspicions to link the two to the anonymous notes.

If they did alert the OCC, their actions might be filed in a drawer labeled: Law of unintended consequences.

Heald and Ricciardone were drawn deeply into a chain reaction of terminations and investigations when the scope of federal curiosity extended far beyond Stuart’s alleged self-dealing with One Bank funds to finance his children’s homes. Though unnamed, the two appear to be part of the narrative in the U.S. Attorney’s forfeiture complaint filed July 12 against Stuart’s estate.

Sources familiar with the investigation identify Heald as “former Employee C” in the complaint. Those same sources identify Ricciardone as “the owner of the marketing company” that allegedly overbilled One Bank by $1 million between January 2009 and August 2011.

According to the forfeiture complaint, “the owner of the marketing company eventually agreed to pay $550,000 restitution to the bank, and this agreement also ended the marketing company’s business relationship with the bank.”

The restitution was made through a $550,000 One Bank loan to “the owner of the marketing company” that was guaranteed by the owner’s father-in-law, according to the complaint. Ricciardone’s father-in-law is Little Rock attorney Richard A. Williams.

The $550,000, however, was allegedly redirected by Stuart into an account for his personal use. “Former Employee C” — Heald — “was generally the person authorizing the bank to pay the marketing company’s invoices,” according to the complaint.

Heald is currently listed as the chief financial officer and a partner in Bespoke Video Production of Little Rock, where Ricciardone is a partner and creative director.

What the forfeiture complaint called the “Overbilling by Marketing Company and Layton Stuart” was one of more than a dozen instances of alleged self-dealing by Stuart.

Accompanying that court action was the seizure of assets valued at $18 million to offset more than $16.8 million in bank funds that Stuart allegedly diverted to his personal use. (See table below.)

Northwestern Mutual and Pacific Life insurance loans* $7,784,502
TARP Funds $2,185,343
Interest from participation loans $2,000,000
Loan for John Hancock Life Insurance policy on Stuart** $1,761,000
Bank-paid personal air travel $1,750,000
Buying and renovating 32 Valley Club Circle $1,096,897
Sale of bank-owned condo in Dallas $765,130
Overbilled marketing restitution $550,000
Bank funds used to pay personal credit cards $377,132
5 personal vehicles purchased by bank $235,555
Embezzlement restitution by fired employee $101,003
Downpayment on 13 Lombardy Lane $53,307
Total $16,898,869
Assets Seized by Federal Agents
Net death benefit on John Hancock
Life Insurance policy on Stuart $17,693,837
Two Bank of America accounts $107,800
2013 Land Rover $67,093 #
2013 Lexus RX350 $46,268 #
2008 Escalade $62,314 #
2011 Cadillac SRX $45,247 #
Net proceeds from sale of house at 13 Lombardy Lane $25,992
Five One Bank accounts $25,263
2008 Global Electric Motorcar $14,633 #
Total $18,088,447
*Bank-owned life insurance policies on senior management.
**Loan was repaid from the $20 million payout after Stuart’s death and isn’t reflected in the diversion dollar total.
#Reflects price paid.

“I’m in a situation where I can’t offer any comments now,” said Richard Torti Sr., executor of Stuart’s estate and trustee of various Stuart family trusts. “But I can tell you the family has been devastated over the loss of their father, a husband and their provider.”

According to court filings, Stuart designated Heald as the original executor of his estate and trustee of the various family trusts created under his will dated Feb. 3, 2006.

Stuart named Torti as executor and trustee in a codicil to his will dated March 11, a mere 15 days before his death.

The largest asset seized was the net payout of a $20 million life insurance policy on Stuart. The government claims the $17.7 million is a fruit of Stuart’s allegedly illegal dealings and that he used tainted money to keep the John Hancock Life Insurance Co. policy in force after he was fired from the bank he owned. The 44-page forfeiture complaint portrays Stuart as living out of the bank, someone who didn’t draw the line between bank owner and fiduciary of a federally regulated financial institution.

In interviews with Arkansas Business after his removal from One Bank, Stuart never admitted to any wrongdoing. He didn’t deny any either.

Stuart did make intimations that the investigation would implicate others, and that there was more than one person of interest.

“I’m not the only one,” Stuart said.

ABCs of One Bank

Other casualties followed after the late Scooter Stuart was forced out of One Bank & Trust at the end of September. The federal investigation that was launched with an anonymous tip in March 2012 is expected to yield more names and charges in the coming weeks.

Tom Whitehead was dismissed as chief financial officer, executive vice president and director of One Bank in December. Two months later, Gary Rickenbach was dismissed as executive vice president, chief loan officer and director.
Sources familiar with the investigation identify Whitehead as “former Employee A” in the forfeiture complaint filed last month by federal prosecutors in Little Rock. Sources identify Matt Sweet, former controller and vice president at One Bank, as “former Employee B.” Sweet left the bank in January 2012. According to the complaint, “former Employee B” allegedly was dismissed by Stuart for embezzling money from the bank. Sweet has not been charged with any crime and Arkansas Business has been unable to locate him for comment.
The complaint alleges that “former Employee B” paid $110,000 in restitution to the bank, and $101,000 of that was diverted to Stuart.
Sources identify Michael Heald, One Bank’s executive vice president, chief operating officer and director until Stuart fired him two years ago, as “former Employee C.”
The alphabet soup of former employees allegedly were all involved in aiding Stuart’s diversion of bank funds, according to the forfeiture complaint.

Sunday, August 4, 2013

Former employee sentenced for credit union theft in Kansas

A woman has been sentenced to 21 months in prison for embezzling from a local credit union, according to a spokesman for the U.S. Attorney's Office.
Carla Welborn was sentenced Tuesday in U.S. District Court in Kansas City, Kan. As part of her sentence, she was ordered to pay $329,702 in restitution, according to information from James Cross, spokesman for the U.S. attorney of Kansas.
The crime occurred between January 2009 and January 2012 while Welborn worked at the Credit Union of Leavenworth County at the Eisenhower VA Medical Center in Leavenworth.
In November, Welborn pleaded guilty to the single count of embezzlement from a credit union.
According to a written plea agreement in the case, Welborn took money from the vault of the credit union's branch office on the VA grounds.
She also reportedly targeted the accounts of credit union members who didn't receive monthly balance statements as well as those who lived out of town or were ill. She redirected mailed statements so account holders wouldn't notice they were missing funds.
If affected account holders requested statements, she sent them fraudulent documents, according to the written plea agreement.

A former credit union employee, sentenced to 21 months in federal prison for embezzlement, targeted accounts of 23 members who were either ill, near death or who lived out of town to steal more than $300,000 over four years, according to court documents.

Carla Welborn, who worked at the Veterans Administration Medical Center branch of the $7 million Credit Union of Leavenworth County in Lansing, Kansas, was also ordered by a U.S. District Judge Kathryn Vratil in Kansas City on July 30 to pay restitution of $28,002 to the credit union and $329,702 to the CUNA Mutual Group.

The documents did not reveal Welborn's title at the credit union.

CULC, which has 1,650 members, was chartered in 1956 to serve veterans, though it also serves businesses, government agencies and individuals in Leavenworth County.

Court documents show Welborn befriended many members and performed extra services for them, such as reconciling accounts and helping them pay bills, even though she was not required by the credit union to provide these services.

In addition to targeting accounts of members who were ill, near death or who lived out of town, Welborn also targeted accounts of members that she knew were not receiving monthly balance statements.

Federal prosecutors said Welborn would redirect some credit union members’ mailed statements to the bank so account holders would not notice their accounts were missing funds. And when account holders wanted statements, Welborn would mail them fraudulent statements. To keep track of the stolen money, she kept a handwritten ledger with amounts taken from each account.

Eventually, according to court documents, Welborn would write checks payable to the credit union’s bank (Country Club Bank) if there was not enough cash on hand at the credit union for her to steal. Country Club Bank would cash the checks because Welborn would indicate that the funds would be used to replenish the “petty cash account” at the credit union.

In 2010, when the credit union changed its correspondent bank to Missouri Corporate Credit Union, the “petty cash” replenishments went directly to the main office in Lansing. Because Welborn did not have access to sufficient cash on hand to steal, she began taking the money out of members’ accounts.

Welborn also took money out of the credit union’s vault, according to court documents. Although the money in the vault was supposed to be counted by at least two employees, Welborn had been covering her tracks by using her son who was working with her at VA Medical Center branch.

“Welborn would often tell her son….the vault was counted and there was no need for him to do it,” court documents state.

Welborn’s son has not been charged by federal prosecutors.

When the credit union became aware of the fraud, an accounting firm was hired to conduct a comprehensive audit, which revealed Welborn stole $304,000 from 23 credit union members from Jan. 1, 2009 to Jan. 26, 2012.

Thursday, August 1, 2013

Former Va. bank manager gets 2 years for fraud.

A former Colonial Heights bank manager who stole about $155,000 from customers was sentenced Thursday to two years in federal prison.

U.S. District Judge John Gibney also ordered Shannon S. Hamilton to make restitution to SunTrust bank, which covered the victims' losses, and banned her from ever working for another financial institution.

The Prince George County woman offered a tearful apology before hearing her sentence.

"I lost my perspective and moral grounding," she said. "I live every day thinking about what I've done, and it haunts me."

Hamilton also turned to face a victim's granddaughter who testified against her and said she was "very, very sorry."

Gibney said the apology was one of the most sincere he has heard in court.

"Everyone's sorry when they get caught, but obviously this has touched you deeper than that," the judge told Hamilton.

However, he also noted that Hamilton targeted some vulnerable, elderly customers in a "fairly elaborate" three-year scheme that resulted in four bank employees being fired for following her directions to violate bank policies.

According to court records, the Prince George County woman misappropriated customers' funds while managing the bank branch from February 2008 to November 2011. She used the money for repayment of her own 401k loan and living expenses. She also repaid some victims with money taken from other victims.

Bank teller gets one year for embezzlement 'for love' in New York

A teller for Chase Bank stole $10,000 from his branch "for love."

He was sentenced to a day in prison in federal court Wednesday. In April, 24-year-old Imran Cheema pleaded guilty to one count of embezzling.

Cheema told district judge Michael Watson that he took the money to impress his girlfriend. He stole the money from a teller cash dispenser just before quitting his teller job last summer and moving to New York.

Cheema was caught when the theft was discovered a week later. The cash dispenser, which tellers use to refill their drawers, was short $10,000. A Secret Service criminal complaint showed Cheema at the dispenser.

In addition to the night in prison, Watson ordered him to repay the money, which he has done. He could have been sentenced to 30 years in prison and ordered to pay a $1 million fine

Jackson Township, Ohio man accused of embezzlement

A Jackson Township financial adviser is facing a federal felony charge of bank embezzlement and five felony counts of filing false tax returns stemming from an alleged scheme to defraud multiple clients out of more than $442,000.
David Lee Cheviron, 61, was a financial accountant for FirstMerit Bank, Huntington Bank and Chase Bank from 2006 to 2010, during which time authorities believe he defrauded the banks and stole money from four clients, according to a news release from the U.S. Attorney’s Office in Cleveland.
Cheviron is accused of making unauthorized withdrawals from the investment accounts of the four clients and forging signatures to deposit money into his personal account, according to court records. He also is accused of failing to report the money received on federal tax returns.
The charges are a result of a joint investigation conducted by the FBI and Internal Revenue Service.
Federal prosecutors allege in court papers that Cheviron’s position as a financial consultant “allowed him to have personal contact with bank customers, access to bank records, and to communicate with, give directions to, and mislead employees” of the banks.
A court hearing is to be scheduled for mid-August. The charges were filed by way of a bill of information, which often signals a defendant’s cooperation with the government.
Cheviron could enter a change of plea to guilty on all or some of the charges, said Daniel Dever, a spokesman for the IRS office in Cleveland.
Cheviron’s hearing is to be in front of federal Judge Donald C. Nugent.
The case against Cheviron is being prosecuted by Assistant U.S. Attorney Vasile C. Katsaros.