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Fraud Friday — 8 Years in Jail for Community Bank CEO, CLO

August 10, 2018

By Dominic J Bartolone
Contributing Editor, Fraud Friday

Fraud Friday — 8 Years in Jail for Community Bank CEO, CLO

Two former bank officers who were complicit in the failure of a Sonoma, CA community bank were sentenced to federal prison on Aug. 3.

Former chief executive officer, Sean Clark Cutting, and former vice president and chief loan officer, Brian Scott Melland, will head to federal prison for their roles in a fraudulent loan scheme that led to the collapse of Sonoma Valley Bank in 2010.

U.S. District Judge Susan Illston sentenced both Cutting, 44, and Melland, 45, to eight years, four months in prison after being convicted in 2017 of conspiracy, bank fraud, wire fraud, money laundering, falsifying bank records, and lying to bank regulators.

A real estate developer’s lawyer was also sentenced for his part in the scheme. David John Lonich, an attorney for Marin County developer Bijan Madjlessi, was sentenced to six years, eight months in federal prison, according to the U.S. Attorney for the Northern District of California.

Lonich was convicted for conspiracy, bank fraud, wire fraud, and other offenses. Madjlessi was also indicted in the case but died in 2014 when his car plunged down a ravine off Pacific Coast Highway near Muir Beach.

The three men were convicted in December of last year for their part in a real estate loan scam that led to the failure of the community bank, after causing over $47 million in losses.

Evidence presented at trial showed that between 2004 and 2010, Sonoma Valley Bank loaned Madjlessi, along with other associates and businesses he controlled, more than $35 million for real estate projects in Santa Rosa and Petaluma in Northern California.

According to the prosecution, the loans authorized by the bank’s CEO, Cutting, were $24.7 million over the legal lending limit set forth by federal regulators.

Last year, Cutting, Melland, and the former bank director Mel Switzer agreed to a $5.4 million civil settlement with the FDIC over their lying to federal regulators and attempt to hide Madjlessi’s identity as the true borrower from the bank’s loan committee.

In December 2017, after five days of deliberation, jurors convicted the pair of former bank executives and Madjlessi’s attorney on 25 separate counts of fraud and other crimes.

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