Fraud Friday — Former Chairman Loots his Bank to Pay off $800,000 of Credit Card Debt, Buys Houses for Kids

October 21, 2016

By Bob Coleman
Editor, Fraud Friday

Fraud Friday — Former Chairman Loots his Bank to Pay off $800,000 of Credit Card Debt, Buys Houses for Kids

Check out this story by Linda Satter of the Arkansas Democrat-Gazette about the widespread fraud at One Bank.

Two former Arkansas bank execs are on trial for bank fraud for being part of a broad conspiracy of illegal activities that the term “honesty” was undefinable.

Says former CFO Tom Whitehead in his testimony against a former CEO and a former EVP.

Fraud charges against Whitehead were dropped in exchange for his cooperation and his testimony.

Another banker, Gary Rickenbach is awaiting sentencing on a charge of knowing about a crime but failing to report it.

Writes Linda:

As the third witness in a jury trial that began Oct. 4 and is expected to last three weeks, Whitehead said Stuart, who was the bank’s chairman, chief executive officer and sole shareholder, used more than $1 million in bank funds for personal expenses, including buying homes for his son and his daughter.

Federal regulators ordered Stuart’s ouster from the bank in 2012. He died of respiratory distress on March 26, 2013, at age 61. About three months later, the government filed a lawsuit seeking the forfeiture of $17.7 million of his assets. The bank received more than $3 million in a partial settlement of the case in May 2014 to cover premiums the bank paid on a $20 million life insurance policy on Stuart.

Among the dishonesty Whitehead described at the bank was Stuart’s use of $400,000 to $500,000 in bank funds that were supposed to be used to support Verizon Arena, but instead were used to pay off Stuart’s credit cards. Whitehead said he knew this because he was the one who made the payments.

Whitehead said Stuart used about $800,000 of bank funds to pay credit card bills for himself and his family.

Whitehead also testified that Stuart’s son, Hunter Stuart, acquired a home in the Pleasant Valley neighborhood of Little Rock in 2009, and, “from then until I left, there were renovations going on at that house” that cost “somewhere south of a million bucks.”

He told Assistant U.S. Attorney Angela Jegley that he knew bank funds were used for the renovations because “I was making the payments to the vendors.”

Before Hunter Stuart’s purchase of the home, Layton Stuart had Whitehead prepare and verify false paperwork to allow his son to qualify for a mortgage, Whitehead said. He said he also signed documents falsely verifying that the bank had confirmed the son’s employment and income, recalling that Stuart told him, “I don’t think it would look good if I signed this. Could you?”
Whitehead testified that the “identical” situation occurred with Layton Stuart’s daughter, Kirby, also in 2009.

The former financial officer also testified about two condominiums in Texas that were purchased with One Bank funds, one for $365,000 and the other of which was under construction at a cost of $700,000 when Whitehead left the bank. He said Hunter Stuart lived in the first one while attending college. Whitehead said he later learned that Layton Stuart had sold the second one “and pilfered the money.”

After another bank executive, Matthew Sweet, repaid $130,000 that was reported embezzled from the bank, Stuart kept about $120,000 of the money, Whitehead said. He recalled that Stuart had him prepare two checks for Sweet to fill out — one to Stuart directly and the other for about $10,000 to the bank. Sweet pleaded guilty in early 2015 to a money laundering charge.

Read the original article here.