bank fraud

The Associated Press is reporting that the shareholders who sued Wilmington Trust are asking a federal judge to approve a proposed $210M bank fraud settlement reached with the bank. The plaintiffs contend that the bank fraudulently hid billions of dollars in bad loans while bank officials misled investors and regulators about overdue commercial real estate loans prior to its sale to M & T Bank Corp. (MTB) several years ago.

As part of the settlement, Wilmington Trust would pay $200M. KPMG, an auditing firm, would pay $10M.

The wrongdoing alleged in the shareholder lawsuit addresses a longer time period than what was noted in a parallel criminal case, in which four ex-Wilmington Trust executives were convicted on conspiracy and fraud charges. Wilmington Trust is the only financial institution to be subject to criminal charges related to TARP (Troubled Asset Relief Program) to date.

A federal grand jury has indicted ex-Bank of Oswego president and CEO Dan Heine and former CFO Diana Yates with running a widespread, five-year conspiracy to hide the Oregon-based bank’s troubled financial state from regulators. According to the indictments, the two of them authorized secret deals to conceal bad loans in the bank’s portfolio from the Federal Deposit Insurance Corp and its own board of directors.

According to the indictment, from September 2009 through last year, Yates and Hein conspired to defraud the bank. The reason for the allege conspiracy was to deceive its shareholders, board of directors, the public, and regulators by making the bank seem more financially robust.

Among their alleged acts:

• Using a bank employee to act as a straw man in a bogus real estate transaction.

• Having the bank make loans to a middleman. The latter would allegedly send loan proceeds to other beleaguered bank borrowers so that they could make their loan payments.

• Having the bank make loans and withdrawals from customer accounts without customer approval or knowledge.

• Mischaracterizing assets in reports to the Board and the FDIC, as well as making false entries in the report about the status of different loans and transactions.

• Hiding information about loans from bank insiders

Articles Tagged with bank fraud

Wilmington Trust Agrees to $210M Settlement in Shareholders’ Bank Fraud Lawsuit

Two Former-Bank of Oswego Executives are Indicted for Fraud