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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.

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