December 9, 2016
By Bob Coleman
Editor, Fraud Friday
Fraud Friday — Former NOVA BANK CEO Sentenced to 14 Months in Jail
Says the Special Inspector General for TARP, “Today another bank CEO was sentenced to prison after being investigated by SIGTARP. This case sends a strong message that trying to defraud the U.S. government out of millions of dollars will carry serious consequences, even if you do not get the federal dollars. Pure and simple, CEO Brian Hartline committed fraud in an attempt to get TARP funding for the Pennsylvania-based bank.
“NOVA Bank was not a healthy bank when it applied for a TARP program for healthy banks. It was suffering major losses and lacked sufficient capital. So when the U.S. government made NOVA Bank’s approval of TARP funds contingent upon raising $15 million in private capital, CEO and president Hartline had a simple decision to make. He could be truthful, follow the law, and – if the bank could not raise the funds – accept the consequences, or he could lie and commit a crime.
“Make no mistake. CEO Hartline chose to commit a crime, by lying, breaking the law, and trying to con taxpayers out of $13 million in TARP funds, which the bank would have gotten except for sheer luck and timing. CEO Hartline used his position of trust as the bank’s most senior leader to commit a crime. He hatched a fraudulent scheme to dupe the government into believing that the bank had raised private investor money.
“The reality was that the bank’s own money flowed out to purported ‘investors’ and then came right back into the bank within the space of two hours. CEO Hartline hid this fact from the government, which wanted new money in the bank—not double counting of existing money. SIGTARP was created to bring justice to bankers who commit fraud. I thank the jury for how seriously they took their duty.”
Hartline co-founded NOVA Bank in 2002. Co-founder and former Villanova basketball player Barry Bekkedam served as the bank’s chairman. He also owned a financial advisory company, Ballamor Capital Management and advised clients to invest in NOVA stock.
But in 2008, NOVA faced risk of failure because of bad loans and investments. In October 2008, NOVA Financial Holdings, Inc., of Berwyn, Penn., the parent company of NOVA Bank, applied for $13.5 million through the U.S. Department of the Treasury Troubled Asset Relief Program.
In June 2009, NOVA Bank was approved to receive the TARP funds on the condition that the bank raised $15 million in additional, private capital.
Bekkedam and Hartline arranged for NOVA Bank to loan money to three individuals to transfer to NOVA’s parent company so it would appear as though the bank had new capital from an outside investor.
In fact, the “new money” investment was the bank’s own money.
The bank ultimately did not receive TARP funds, and in October 2012, the bank failed and was closed by state and federal banking regulators.