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Fraud Friday — Georgia Banker Gets 7 Years for Bank Fraud, Refinancing Non-Performing Loans with an SBA Guaranty

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June 10, 2016

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Georgia Banker Gets 7 Years for Bank Fraud, Refinancing Non-Performing Loans with an SBA Guaranty

“Today, another TARP banker was sentenced to jail for hiding a bank’s past due loans during the crisis to make the bank appear healthy,” says Christy Goldsmith Romero, Special Inspector General for TARP. “SIGTARP special agents working with prosecutors at the U.S. Attorney’s Office in the Middle District of Georgia and other law enforcement partners uncovered that Tifton Banking Company President and CEO Pat Hall engaged in a long running fraud scheme that began pre-crisis in 2005. He made risky bank loans pre-crisis, and later criminally concealed the fact that the loans were past due and that the collateral had dropped in value.

“On behalf of the bank, in 2009, Hall obtained $3.8 million in TARP bailout funds to fill holes in the bank’s books caused by his fraud, all of which was lost when the bank failed. He deceived taxpayers, shareholders including Treasury, banking regulators and the bank’s loan committee. TARP was not a bailout for bank fraud and SIGTARP and our law enforcement partners will ensure that bankers who commit fraud related to TARP will be brought to justice,” says Romero.

Acting United States Attorney G.F. Peterman, III says, “As the president of the Tift Banking Company, Gary Patton Hall owed a duty to its depositors to protect and care for their money more carefully than if it were his own; instead, he used it like it was his own. His self-dealing and dishonesty violated the trust his own community and neighbors had placed in him, causing harm to them and to the reputation of the banking industry itself. I commend the federal and local authorities who investigated this case and brought Mr. Hall to justice for his violation of that trust.”

Hall hid past due loans from the FDIC and the TBC loan committee, which resulted in the bank continuing to approve and renew delinquent loans and loans for which the collateral was lacking.

Several of the borrowers eventually defaulted on the loans, resulting in millions of dollars in losses to TBC and others. Hall admitted that in certain transactions in which he exercised approval authority, Mr. Hall hid his personal and business interests.

In one instance, Mr. Hall approved loans to the buyer of a condominium in Panama City Beach, Florida, owned by Mr. Hall himself. In doing so, he made false representations about the loans to TBC’s loan committee and failed to disclose his personal interest in the transaction. When the buyer’s loan payments became delinquent, Mr. Hall hid the loans from both the FDIC and state regulators. Mr. Hall received $50,000 profit from the sale of his condominium in this transaction, the entire purchase price being funded in full by an unsecured loan to the buyer approved by him. The buyer eventually declared bankruptcy resulting in a loss of more than $400,000 to TBC.

Additionally, Mr. Hall admitted to making fraudulent representations which led to loan guarantees being issued by the United States Small Business Administration and the United States Department of Agriculture on two other loan transactions.

The loans were made by TBC, and guaranteed by the government agencies, to refinance earlier non-performing loans made by TBC. Those guaranteed loans resulted in losses to the bank and the agencies of more than $2 million.

TBC was closed by the regulators in 2010.

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