August 12, 2022
Fraud Friday – First NBC Fraud Costs Almost $1 Billion
“Mr. Calloway has admitted his wrongdoing and accepted full responsibility for his conduct,” says his new attorney, Dane Ball, in a statement. “Today Mr. Calloway begins a new chapter of his life, starting with his cooperation in this case.”
After the former First NBC Bank’s EVP, Robert Calloway, pleaded guilty to a bank fraud conspiracy charge last week, he will now be taking the stands as a prosecution witness in the trial against the other defendants in this fraud case. Two of the defendants include Ashton Ryan and William Burnell. Ashton Ryan was a founder, President, CEO, and Chairman of the Board at First NBC Bank while William Burnell was the bank’s Chief Credit Officer.
The indictment claims that Ryan created a “cheat sheet” to help determine the amount of loan proceeds necessary to cover one borrower’s loan payments and overdrafts by the end of the month so the borrower was off the month-end reports. Burnell and Ryan knew that the borrower did not have sufficient cash flow and had no intentions of spending the loan proceeds for their approved purpose. The pair also allegedly instructed bank employees to process loans that never received signatures from “Nominee D”, a guarantor on the loans.
In the case of another borrower, Ryan was an approving officer and Burnell approved the credit risk rating. They were repeatedly informed that this borrower made fraudulent misrepresentations to obtain loans and that he was living beyond his means allegedly. Instead of alerting the board of the borrower’s fraudulent accounts receivable, they continued approving $5.8 million in new loans, renewals with increases, and consolidated loans.
A third example of the many included in the indictment involves a borrower that Ryan was personally borrowing money from. FDIC regulations require that Ryan disclose his relationship with the customer, but he told the borrower not to inform other bank employees. Ryan told this borrower to inflate his assets on loan documents, and with the funds received, the borrower would lend money to Ryan. The indictment states that the FDIC discovered this relationship during a regulatory exam, and Ryan claimed that he did not know that the money the borrower was loaning him was from First NBC Bank.
After the unsound lending practices that bank executives allowed, the bank’s collapse ultimately cost the FDIC nearly $1 billion.
The trial is scheduled to start on January 3, 2023.