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Fraud Friday — Community Banker Gets 68 Months For Bank Closing Related Fraud

June 1, 2018

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Community Banker Gets 68 Months For Bank Closing Related Fraud

“As the majority shareholder who virtually had complete control of Excel Bank, Shaun Hayes caused devastation by repeatedly abusing his power to commit fraud,” says Special Inspector General Christy Goldsmith Romero. “His crime caused millions in losses, threatened the very soundness of the bank that later failed, and caused bank employees to lose much of their nest eggs. The bank failure meant that TARP was never repaid and taxpayers suffered $5 million in TARP losses, all while he profited from concealing the fraud from regulators. This case is a great example of law enforcement collaborating to bring justice and I thank our partner U.S. Attorney’s Office, the FBI, and other inspector general offices.”

On Tuesday, Shaun Hayes, 58, was sentenced to 68 months in federal prison for bank fraud and illegal insider loans. Shuan is to pay restitution in the amount of $5 million.

In 2009 the bank opened a loan production office and at Shaun’s direction the commercial and residential real estate lending at the Missouri-based bank increased dramatically.

As part of his guilty plea, Shaun admitted that he helped set up a loan at Excel Bank to a straw party in the amount of $3.3 million and used $906,000 of the proceeds to pay off a loan he and his business associate, Michael Litz, had guaranteed at Centrue Bank.

Shaun admitted that his interest in the loan was concealed from bank officials and he and Litz made no payments to Excel Bank. Shaun assisted in making millions of dollars in other loans to straw parties in order to cover the delinquent and substandard loans owed by Litz’s business at other banks.

Shaun was also sentenced on an illegal insider loan through which he and Litz each received $300,000. Shaun and Litz structured the payout through several entities so as to insure that their interests were concealed.

Shaun was a principal at three banks which failed in 2011-2012—Excel Bank, Sun Security Bank and Truman Bank. According to the FDIC, the federal insurance fund loss for those three banks was estimated at slightly more than $160 million at the close of 2017. It was also noted to the court that Shaun was paid $1,863,076 by Excel Bank in dividends and fees from late 2007 when he gained control of the bank through March 2010 when regulators ordered a stop to the payments.

Litz was sentenced earlier this month to 36 months in prison.

Timothy Murphy, the former Executive Vice president at Excel Bank, pled guilty earlier this year of bank fraud was sentenced to probation based on his cooperation in the investigation.
Shaun has been incarcerated since April 2017 when a Judge ruled that he had violated the conditions of his bond by participating in investment activities without getting clearance from his bond officer.

Previous Reporting

Fraud Friday: Insider Loan Fraud Borrower Sentenced to Three Years in Prison, May 18, 2018

Fraud Friday — Two Community Bankers, Borrower Guilty of Insider Loan Fraud, February 16, 2018

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