August 5, 2022
Fraud Friday – Bank Executive Vice President Pleads Guilty to Conspiracy to Defraud his Bank
“Today’s plea sends a clear message that bank executives who commit fraud and deliberately deceive regulators will be brought to justice for their actions. I commend our agent and their federal law enforcement partners for their hard work and persistence, which ultimately led to this outcome,” says Stephen Donnelly, Acting Special Agent in Charge, Eastern Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
According to a press release, Robert Calloway and other First NBC Bank officers conspired to conceal the financial condition of a bank borrower from auditors, examiners, and the bank’s Board of Directors. They falsely stated in the loan documents that the borrower would be able to pay his loans with revenue from his business, knowing that his spending was “out of control” and his businesses did not generate sufficient income.
Further, Calloway and others would use loan proceeds to pay the borrower’s overdrafts and existing debt service to keep the borrower off month-end reports. These reports documented any borrowers with overdrafts or past-due loans. Also, to avoid the borrower’s appearance on overdraft and past-due reports Calloway and others made misrepresentations and material omissions about the borrower’s creditworthiness and financial status. They evaded inquiries by the Board, auditors, and examiners with this strategy.
In reality, the borrower used new loans from First NBC Bank to make payments on existing loans. The borrower used loan proceeds to fund private planes for personal travel, two sport fishing boats, vehicles for the borrower and his family, and multiple personal residences.
Eventually, this borrower’s debt to the bank reached $123 million.
Calloway pleaded guilty to a superseding bill of information that charged him with one count of conspiracy to commit bank fraud. His sentencing is scheduled for March 16, 2023.