Fraud Friday – Criminalizing Bad Loan Decisions Update


April 19, 2013

By Bob Coleman
Editor, Coleman Report

prison032013-2The trial of five former community bankers continues in Virginia, where the federal prosecutors’ main witnesses are two borrowers who were lent $40 million from the Bank of Commonwealth.

This week’s highlights:

Co-defendant, real estate developer, Dwight Etheridge, had a groundbreaking ceremony for a five-story office building in a depressed neighborhood of Norfolk. The land had been purchased from the city for $10. The problem was he did not have the financing lined up.

However, later the bank CEO approved a $250,000 loan for preconstruction costs, the loan increased to $750,000 in the Spring of 2011. The problem say prosecutors is some of the loan proceeds were used to pay off other past-due loans at the bank.

Building a case for a quid pro quo, prosecutors say Etheridge was urged by the bank to take over a failed $4 million condominium development loan. He did and hundreds of thousands of dollars in draw requests were submitted for construction work.

The problem is a construction manager of Etheridge testified the draw requests were bogus.

Additionally, a former bank vice president, who has already pled guilty to fraud, testified he was told by the bank CEO to tell Etheredge to move the $250,000 loan proceeds to another bank before paying off overdue loans.

Check out the latest three stories from the Virginian-Pilot here.

Witness: Existing loans used to repay past-due loans
Ex-bank exec says he repeatedly lied, shuffled loans
Witness: Developer pitched project, then sought a loan