November 2, 2018

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Community Bank CEO Indicted for Turning Loans into Bank Capital, Pocketing Fee

During the Great Recession New Jersey-based First State Bank needed capital.

Former CEO, Joseph Natale and an investment adviser concocted a scheme of turning a $7 million loan into bank capital say the Feds.

They then tried to obtain funds from the Troubled Asset Relief Program, which got SIGTARP’s attention about their bookkeeping.

Their 13-count indictment filed earlier this week says FSB was defrauded into paying $715,000 in fees for that fabricated capital to Albert Gasparro, who then split that money with Natale.

Enter Gary Ketchum, a New Jersey small business owner.

To conceal this misconduct, three fraudulent loans were subsequently obtained from FSB, from which Ketchum wrongfully received an additional $176,000 concludes the indictment.

The bank was closed by the FDIC in 2011.

Donna Conroy, the bank’s legal counsel, pleaded guilty to bank fraud in May 2017 and is awaiting sentencing.

“Various conspirators caused FSB to make millions of dollars in loans based on material misrepresentations in order to cover up the fraudulent nature of the capital infusion and end inquiries from FSB’s auditors,” according to the U.S. Attorney’s Office.

“Finally, Conroy and her squad tried to lie to federal regulators and bank officials.”