July 24, 2015
By Bob Coleman
Editor, Fraud Friday
Following last month’s arrest of the former CEO and CFO of Bank of Oswego, the chief BDO and rainmaker of the bank pled guilty Wednesday for his role in cooking the books for the regulators.
During the recession, the Portland, Oregon suburban bank was an outlier. While everyone else hunkered down and slashed assets, and staff, the bank reported explosive loan growth and minimal problem loans.
Seemed too good to be true, and prosecutors say it was.
Geoff Walsh will serve between four and seven years as the result of his three count fraud guilty plea when he is sentenced in November according to fed guidelines.
Here is what he did says Geoff in his guilty plea.
As to Count 1 of the Information, from at least 2009 through February 2011, the Bank of
Oswego -where I was employed at the time-was in second position on a loan taken by the owner of property located at 952 A Avenue, Lake Oswego, OR.
The first mortgage was held by Citibank. In approximately October 2010, the A Avenue
property went into foreclosure, and Citibank sold the property to the Federal National
Mortgage Association (FNMA), commonly known as Fannie Mae. In the normal course,
if the property were ultimately sold to a buyer for less than the amount of the first
mortgage, the Bank of Oswego would have suffered a loss of approximately $325,000,
the value of the second mortgage it held on the property, and would have had to list that
loss on its “call report” to the FDIC.
Bank officers wanted to minimize the Bank’s loss on the property and did not want to report the loss to the FDIC because it would affect the Bank’s creditworthiness and rating. An individual with the initials G.R. expressed to the Bank an interest in purchasing the property for a price higher than the amount of the first mortgage on the property, which price would reduce the loss that the Bank might otherwise suffer upon the sale of the property.
I and others at the Bank attempted to have the Bank purchase the property, after which the Bank would sell the property to G.R.
Originally, an attempt was made to purchase the first mortgage note from Citibank, but
Citibank informed the Bank that the property had been sold to FNMA as part of a larger
pool of loans. I and others at the Bank then attempted to purchase the property, on behalf
of the Bank, from FNMA, but we were told that the property could only be sold to an
individual, not a banking institution.
In approximately January 2011, I and others at the Bank invited “D.W.,” an employee at the Bank, to become a “straw buyer” to purchase 952 A Avenue, Lake Oswego, Oregon, after which D.W. would transfer ownership to the Bank, which would then sell it to G.R. The Bank gave $267,000 of Bank of Oswego funds to D.W. to “purchase” the property. We failed to create any loan documentation for these funds.
We also caused D.W. to sign and submit to Fannie Mae, a variety of false documents in order to complete the sale. Once the sale was completed, D.W. deeded the A Avenue property to Bank of Oswego, and the Bank immediately sold the property to G.R. for $355,000, thereby avoiding approximately $90,000 of loss that the Bank would otherwise have suffered. The Bank subsequently submitted call reports to the FDIC about the status of the real property located at 952 A Avenue, Lake Oswego, Oregon.
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