CASE STUDIES

Representative Bank Investigations

Institution

Benton Banking Company, Tennessee

Asset Size

$100 Million

Role

Case Agent/Supervisor

Summary

CEO made a number of fictitious loans to cover and conceal millions $ in overdrafts by largest deposit customer.  Loss: $18 Million

Institution

Community Bank of Decatur, Alabama

Asset Size

$500 Million

Role

Supervisor

Summary

CEO/COB embezzled $ millions via inflated-priced real estate sales to bank for branch locations; inflated and un-necessary sub-contracts with family members; and using bank contractors to perform personal services by charging fictitious construction projects to the bank. Loss: $40 Million

Institution

Eurobank,
San Juan, Puerto Rico

Asset Size

$2.6 Billion

Role

Case Agent

Summary

Eurobank was largest lender on leased used cars in the Caribbean and also financed a number of suspicious construction projects that benefitted customers with local political influence. The bank financed a number of vehicles leased to multiple lessors at the same time, as well as financing the leasing of vehicles that had not been registered for years. Bank insiders orchestrated the movement of funds through various accounts to conceal the frauds. Loss: $1 Billion +

Institution

First National Bank of Keystone, West Virginia

Asset Size

$1.1 Billion

Role

Case Agent/Supervisor

Summary

Brokered Deposits funded a massive sub-prime (2nd mortgage home improvement) loan securitization program marketed by Bear Sterns and Lehman Brothers. Loan program was created to cover embezzlement by insiders via fictitious fees and loans to insider-owned retail businesses, gas companies in Florida, bingo parlors in Alabama, and real estate in Tennessee and South Carolina. Loss: $850 Million

Institution

Fleet Bank,
Boston, Mass

Asset Size

$? Billion

Role

Case Agent

Summary

Customer operated a loan company that financed taxi- cab medallions and made mortgage loans at usury rates. These loans collateralized customer’s business LOC’s and allowed customer to siphon off $millions. Loss: $30 Million.

Institution

Hamilton Bank, N.A., Miami, Florida

Asset Size

$1.2 Billion

Role

Case Agent/Supervisor

Summary

Business line was financing trade in Central and South America and Eastern Europe. Specific case involved asset swaps of Brazilian steel company debt for Russian municipal debt. Swaps facilitated thru foreign banks in England and Germany. Swaps hid bank losses during an IPO that netted CEO/COO $50 million.
Loss: $160 Million

Institution

Oakwood Deposit Bank, Ohio

Asset Size

$62 Million

Role

Supervisor

Summary

Insider abuse – brokered deposits to fund “loans” which were actually used to finance an offshore gambling fleet in Florida; Loss: $80 Million (due to off-book depositors)

Institution

R-G Premier Bank,
Hato Rey, Puerto Rico

Asset Size

$6 Billion

Role

Case Agent

Summary

R-G Premier was the oldest and largest home mortgage originator in Puerto Rico and the Caribbean. It branched out into residential and commercial real estate financing and orchestrated a number of straw loans to benefit bank insiders. CEO and BOD created a number of “creditworthy” persons to act as buyers of property that BOD members sold but did not actually own, and others to act as borrowers on property that did not actually exist.
Loss: $2.5 Million +

Institution

Sinclair National Bank, Arkansas

Asset Size

$29 Million

Role

Supervisor

Summary

“Bust-out” of bank by CEO, a former securities broker in Missouri. He “sold” securities company to a subordinate for $4 million cash and took note for $20 million, and used cash to buy bank. Bank immediately began buying securities from owner’s former company, generating $20 million to repay debt to banker. Securities proved to be worthless. In an agreed settlement with Missouri AG, bank took loss of $4 Million.

Institution

Silverton Bank (formerly Georgia Banker’s Bank), Atlanta, Ga.

Asset Size

$4 Billion

Role

Case Agent/Supervisor

Summary

Bank began an aggressive loan participation program involving it’s 1000+ customer banks. Funding came in part from manipulation of Fed Funds over-night correspondent account, as well as bank stock loans and securities trading accounts.
Loss: $1 Billion

Institution

Superior Bank, FSB, Hinsdale, Ill

Asset Size

$2.2 Billion

Role

Case Agent/Supervisor

Summary

Another “bust-out” involving transfer of cash to non-bank affiliates thru purchase of sub-prime loans and associated services (origination fees, appraisals, and servicing rights). Loss: $430 Million

Institution

Western Bank,
Mayaguez, Puerto Rico

Asset Size

$12 Billion

Role

Case Agent

Summary

Western Bank was a huge business operations and accounts receivable lender, especially to European and Middle Eastern pharmaceutical manufacturers operating in Puerto Rico. Faulty bank operations allowed some of these customers to increase loan proceeds by submitting $ millions in fictitious receivables and allowed the proceeds to leave the U.S.
Loss: $1 Billion +

Over 75 years of federal investigative experience

Representative Post-Government Engagements

Institution

Bank Fraud – White Collar Defense

Asset Size

$5 Million

Type

Criminal Matter

Summary

The federal government brought criminal bank fraud charges against a Georgia “hard money lender” during the housing boom and bust of 2007 and beyond. The defendant was charged with bank fraud involving $5 million in lines of credit (LOC) which were then loaned to various residential contractors. The lines of credit were secured by the construction projects of the borrowers of the defendant. The banks failed, the construction projects failed to sell, and the defendant was unable to repay the entire loan. The government also charged the defendant with responsibility for the failed institutions. Our investigation revealed that the banks engaged in deceptive loan practices and concealed the true nature of the loans from regulators. We also determined that the construction companies misused the loan proceeds by paying other debts on prior projects. A week-long jury trial was held in federal court and the jury found the defendant “Not Guilty” on all counts.

Institution

Casino Debtor

Asset Size

$6 Million

Type

Civil Matter

Summary

A neo-natal surgeon filed bankruptcy in the face of approximately $6 million in debts to multiple Las Vegas casinos. Our investigation determined that the debtor had concealed approximately $3 million in overseas accounts. Settlement was reached with a payment of $2.5 million.

Institution

Bank Fraud – Deposits

Asset Size

$5 Million

Type

Civil Matter

Summary

A state Insurance Commissioner was forced to close an insolvent insurance company due to the disappearance of approximately $5 million in a reserve account in the custody of large national bank. The bank, as custodian of the reserve account, submitted quarterly reports to the Commissioner confirming the reserve account balance. Prior to our involvement, the Commissioner had obtained approximately $4 million in judgements against the insurance company, leaving the bank as the last defendant. Our investigation determined that the bank had convinced the insurance company owner to allow the bank to utilize the reserve account to service the bank’s loans (which were in default) to “sister” companies of the insurance company. This fraud continued for over 2 years during which the bank submitted fraudulent quarterly account balance statements to the Insurance Commissioner. The bank also submitted false reports to its regulator to conceal the fraud. Prior to trial, the bank agreed to settle the remaining $850,000 loss for $680,000.

Institution

Business Broker

Asset Size

$1 Million

Type

Civil Matter

Summary

A business broker arranged the sale of a Kentucky coal mining supplier to a Tennessee company. The broker’s client, the Kentucky company, abruptly cancelled the sale the morning after the celebratory dinner, but before the culmination of the sale. The Kentucky client then refused to pay the broker’s commission of nearly $1 million. Our investigation determined that the Kentucky company’s owners had engaged in a “pump and dump” to inflate the company’s value thru falsified inventory and sales records. Settlement was reached for over 70% of the owed commission.

Institution

Business Divorce – Financial Fraud

Asset Size

$10 Million

Type

Civil Matter

Summary

A non-public partnership providing electronic records management and security to healthcare and hospital providers fell into a huge dispute between the three equal owners. Our client was being forced out by his partners and he felt they had deliberately devalued the company thru fraudulent expenses, phantom vendors, and asset conversion to family members. Our client felt the company was valued at roughly $10 million. The two partners were offering him less than $900,000 to leave and resolve all his claims. Suit was filed and discovery began. Our investigation confirmed many of our client’s claims of fraud and at mediation the partners agreed to settle and wrote a check for $2.8 million to our client.

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