Fraud Friday – Bank Executive Sentenced to Five Years in Prison for Role in Construction Fraud Scheme
November 20, 2020
By Caity Witucki
Editor, Fraud Friday
Fraud Friday – Bank Executive Sentenced to Five Years in Prison for Role in Construction Fraud Scheme
Troy Gregory, a former senior lending officer and executive at University National Bank, has been found guilty of making false statements to twenty-six Kansas banks in order to convince them of participating in a $15.2 million loan to a group of financially unfit borrowers.
The borrowers, a group of real estate developers, were already underwater after investing in a single-family home construction project near the U.S. Army installation at Fort Riley. Upon discovering that the soldiers stationed at Fort Riley preferred renting apartments to buying homes, the developers struggled to make payments on their construction loans.
In an attempt to earn money to cover the borrowers’ previous loans, Gregory lied to his bank’s board of directors and numerous other lending institutions about the strength of the borrowers, the debt status of the apartment property, and the existence of approximately $1.7 million in certificates of deposit for collateral on the loan.
After the loan funds were approved, Gregory immediately diverted over $1 million in loan proceeds to purchase some of the certificates of deposit, pay off some of the debt on the apartment property and make payments on the failed housing project.
When the housing bubble burst in 2007, the completed apartments were appraised at a far lower value than expected, pushing the loan into default. As a result, the participating banks were forced to take approximately 5 million dollars in losses.
On August 20, 2019, Gregory was found guilty of four counts of bank fraud and two counts of false statements. He has been sentenced to five years in federal prison for his role in the loan scheme and ordered to pay $4.7 million in restitution.