Febraury 27, 2015
By Bob Coleman
Editor, Fraud Friday
The feds finally get a too-big-to-jail banker by inducing a guilty plea by former Bank of America Senior Vice President, Justin Brough.
Christy Romero, Special Inspector General for TARP says, “Brough, a former senior vice president at Bank of America, pleaded guilty to misapplying bank funds in a scheme designed to bypass the bank’s controls on requiring personal guarantees for a construction loan and line of credit to acquire a business, loans that later defaulted and cost the TARP bank more than $6.4 million.
“Months after Bank of America received TARP bailout funds, the bank’s risk management department decided that the bank would not make a $6.3 million construction loan that Brough requested unless the borrower made a cash guarantee of $5 million. Brough forged the signatures of other unsuspecting clients to make the guarantee. In another instance, Brough tricked a set of clients into signing personal guarantees. When both loans began to go bad, Brough misapplied the bank’s general ledger funds in an attempt to conceal his scam and to keep the loans current.
“Risk management at banks, particularly at TARP banks, is incredibly important to protect not only the bank, but taxpayers who were called upon to bailout these banks. We commend the Justice Department Criminal Division’s Fraud Section, U.S. Attorney Daniel Bogden, and the FBI for standing united with SIGTARP against bailout-related crime.”
Brough was a senior vice president at BOA in Las Vegas, serving as a business banking market executive. Brough provided financial services to high-net-worth clients. Brough admitted to misapplying bank funds in connection with two business loans: a $6.3 million shortterm construction loan, and a $600,000 line of credit in connection with the acquisition of a business. Brough admitted that neither borrower qualified for the loans, because they did not meet the bank’s underwriting requirements. Brough further admitted that he falsified documents in order to help both borrowers obtain the loans, including forging signatures on loan papers. According to Brough’s admissions, when the borrowers had difficulty making payments on the loans, Brough misused the bank’s general ledger fund to make a total of $436,676 in payments on the loans for the borrowers. Brough admitted that he disguised those payments, among other ways, as “goodwill,” “miscellaneous adjustments,” and refunds of various fees. He also admitted that he kept each of the individual payments under $10,000 so he would not need additional approval within BOA. Both borrowers ultimately defaulted on the loans. According to Brough’s plea agreement, the aggregate loss to BOA was $6,468,767: $5,291,000 on the first loan, and $1,177,167 on the second loan.
Bank of America received a total of $45 billion in TARP funds and the bank repaid the funds in full in December 2009.
A sentencing hearing is scheduled for May 28, 2015.