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Fraud Friday — Fraud Charges Against More Wilmington Trust Officers

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May 8, 2015

By Bob Coleman
Editor, Fraud Friday

Add the former Chief Credit Officer and Controller to the list of Wilmington Trust bank officers criminally charged in the Delaware bank’s failure.

The feds allege that Kevyn Rakowski, and William North omitted approximately $351 million of matured loans 90 days or more past due from Wilmington Trust’s disclosures in the third quarter of 2009, so that the bank disclosed only $38.7 million of such loans.

They also omitted approximately $330.2 million of these loans in the fourth quarter of 2009, so that the bank’s annual report disclosed just $30.6 million in matured loans 90 days or more past due.

North, as the bank’s Chief Credit Officer, approved the exclusion or “waiver” of such loans from internal reports that he knew would be used to generate the bank’s external financial reports.

Rakowski, as Controller, approved the bank’s filings with the SEC and the Federal Reserve knowing that those reports did not include past due loans that had been “waived.”

In announcing the Indictment, United States Attorney for the District of Delaware Charles M. Oberly, III, says, “This Indictment represents another significant step forward in holding accountable those individuals whose criminal conduct contributed to the decline of Wilmington Trust. As the Chief Credit Officer and Controller of Wilmington Trust, North and Rakowski knew that the false information being provided to the Bank’s regulators and shareholders masked the true condition of its loan portfolio. Their respective roles in compiling and providing this false information to regulators during the Fall of 2009 are addressed in the Indictment returned today by the Grand Jury.”

“We are committed to holding accountable wrongdoers whose fraudulent actions impact the safety and soundness of financial institutions regulated by the Federal Reserve Board,” says Mark Bialek, Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau.

“Bankers across our nation faced rising past due loans during the financial crisis, but not all made a choice to hide the bad loans from shareholders and regulators like these two former Wilmington Trust officers are alleged to have done,” says Christy Romero, Special Inspector General for TARP (SIGTARP). We commend United States Attorney Charles Oberly and our law enforcement partners for standing firm with SIGTARP to combat TARP-related crime.”

“Today’s indictment of William North and Kevyn Rakowski sends a strong message that individuals who engage in this type of financial fraud will not go undetected” says Akeia Conner, Special Agent In Charge, IRS Criminal Investigation. “The IRS is proud to share its financial investigative expertise in this and other increasingly sophisticated financial investigations. We will continue to work with our law enforcement partners to bring this investigation to a thorough and complete conclusion.”

Three others have been ensnared in the Wilmington Trust criminal investigation.

Peter Hayes, Relationship Manager was indicted on three counts of bank fraud in July 2014

Brian Bailey, Market Manager pled guilty to one count of bank fraud in August 2014

James Ladio, Borrower and former President of MidCoast Community Bank was sentenced to two years in jail last November.

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