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Fraud Friday — Four Wilmington Trust Bankers Convicted

May 11, 2018

Fraud Friday — Four Wilmington Trust Bankers Convicted

By Bob Coleman
Editor, Fraud Friday

Officials at Wilmington Trust were convicted of fraud, conspiracy, and making false statements to federal regulators as a result of the bank’s practice of “waiving” matured loans from reporting requirements as current for interest, resulting in artificially low numbers of past due loans. Former bank president Robert Harra Jr., former chief credit officer William North, former chief financial officer David Gibson and former controller Kevyn Rakowski were found guilty of the charges with no sentencing date set.

In the fourth quarter of 2009, Wilmington Trust officials reported only $10.8 million in commercial loans as 90 days or more past due, concealing more than $316 million in past due loans subject to the waiver practice, according to prosecutors. The practice continued without disclosure through November 2010. This is in spite of the fact that a federal examination of the bank in October 2009 resulted in a memorandum of understanding requiring the bank, among other obligations, to submit past-due loan information monthly, instead of quarterly.

“Bankers across the nation told the truth about the financial state of banks they led,” says Christy Goldsmith Romero, the TARP’s special inspector general. “But these four executives at TARP recipient Wilmington Trust turned the bank’s books into a house of cards where past due loans were waived. The house of cards eventually collapsed.” Wilmington Trust was the only bank to be charged criminally from the TARP bailout program.

Defense attorneys argued that the waiver practice had been in place for decades and was no secret.

“We have always maintained, and continue to maintain, that it was fundamentally unfair to allow a criminal prosecution for false public reporting, where the prosecution’s focus was upon the bank’s decades-old process for public reporting,” says David Wilks, an attorney for North.

Two other former Wilmington Trust officers, Delaware Market Officer Brian Bailey and loan officer Peter Hayes, also have pleaded guilty and are awaiting sentencing.

 

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