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Mug Shot Monday — Bank Owner Charged with $70 Million Fraud – Lied about Bank’s Financial Condition, Built Tunnel at his House

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August 12, 2013

By Bob Coleman
Editor, Coleman Report

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Three directors of a failed bank, also the chairman’s wife, have been charged with a $70 million bank fraud that resulted in the closing of Illinois based Premier Bank.

The indictment says that from 2006 until the bank’s failure, the defendants hid the poor financial condition of the bank from state regulators. It alleges that Dr. Zulfikar Esmail, 70, engaged in a criminal shakedown scheme, soliciting and demanding bribes in connection with applications made for business loans and lines of credit to open and operate several Michael’s Fresh Market grocery stores in the Chicago area.

The indictment alleged Zulfikar Esmail demanded his children be given ownership stakes in the stores in exchange for loans and lines of credit.

The Attorney General also alleged Zulfikar Esmail ordered construction and improvement work done on his home and rental properties he owned, including the construction of an underground tunnel on the property of his home. The indictment alleges Esmail directed the contractor to prepare invoices that fraudulently showed the work was done at the bank in order to bill the bank for the work.

“The perpetrators of this criminal enterprise are charged with using taxpayer funds to further their own shakedown scheme at time when our country was on the brink of disaster,” the Illinois Attorney General said. “Their brazen actions to cover up this fraudulent scheme led to the failure of Premier Bank at the expense of its trusting customers and American taxpayers.”

By late 2008, when authorities allege the bank was nearing failure, the bank applied for and received the first of two payments from TARP, ultimately receiving a total of $6.8 million in taxpayer dollars, in order to further the criminal scheme.

“On July 10, 2013, SIGTARP federal agents participated in the arrest of the individuals charged today, which represents the first criminal enterprise charges brought against officers and directors of a TARP bank,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “Esmail, the former Chairman of TARP recipient Premier Bank, stands charged of orchestrating a criminal enterprise by using Premier Bank as his personal fiefdom and of exploiting TARP to finance an alleged long-running criminal enterprise while fattening his own pockets at the expense of customers and federal taxpayers. Esmail, his wife who was a senior officer and general counsel of the bank, and two bank directors are charged with a massive bank fraud conspiracy that hid the true financial condition of the bank. They are also charged with theft by deception for using allegedly fraudulent bank records to get $6.8 million in TARP bailout funds from Treasury, all of which was lost when the bank collapsed under the weight of this alleged fraud. SIGTARP and our law enforcement partners will aggressively investigate allegations of TARP fraud and ensure that TARP funds are used for their intended purpose, not to fund criminal activity.”

The bank’s failure in 2012 resulted in a total loss to FDIC of $64.1 million.

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