February 12, 2021

Caity Roach
Editor

Fraud Friday – Bank CEO Hides Nearly $1 Billion in Fraudulent Loans from Regulators

“Today’s indictment sends a clear message that bank executives who engage in fraud that impacts the safety and soundness of financial institutions will be held accountable for their actions,” says the Acting Special Agent for the Federal Reserve OIG and the CFPB.

Former President and CEO of the now-defunct First NBC Bank, Ashton Ryan, has been indicted for allegedly conspiring to defraud the Bank by concealing the true financial status of certain borrowers and their troubled loans from the bank’s Board of Directors, auditors, and examiners.

During the course of the conspiracy, Ryan and four other executives at First NBC Bank repeatedly extended new loans to borrowers who were unable to make payments on their existing bank loans. The borrowers were then allegedly instructed to use the proceeds from their new loans to make payments on their old loans. This practice prevented the borrowers’ names from appearing on the month-end overdraft reports that Ryan gave the Bank’s Board of Directors, concealing the borrowers’ cash flow problems. 

Ryan and his co-conspirators also allegedly made false statements about the purpose of those loans, misrepresenting in Bank documents that the borrowers were able to pay loans with cash generated from their businesses. As a result, this unintentionally hid the fact that many of the borrowers were spending the proceeds of their business loans on unrelated personal expenses.

When members of the Board or the Bank’s outside auditors and examiners asked about the loans, Ryan allegedly made false statements about the borrowers’ inability to pay their debts without getting new loans. This allowed the balance on these borrowers’ loans to continue to grow exponentially. 

By the time regulators closed First NBC Bank in April of 2017, one bank customer owed over $123 million and six others had balances ranging from $6 million to $46 million. In total, the bank executives’ actions cost the FDIC deposit insurance fund just under $1 billion. 

Ryan was charged with 44 counts of fraud in an initial indictment in July 2020. However, in January of this year, 3 additional counts were added against Ryan and his co-conspirators. For each of the charged counts, the maximum penalties that may be imposed upon conviction are thirty years in prison and a fine of $1,000,000.

Source: 
Department of Justice