January 21, 2022
Fraud Friday – Jailed Sonoma Valley Bank Execs’ Prison Sentence Voided
The appellate panel of judges claim that the case relied too heavily on the bank officers being responsible for the bank’s collapse. At the time of Sonoma Valley Bank’s closure, the Great Recession was wreaking havoc on the economy. Federal bank regulators also reported that poor bank management, liquidity issues, and bad markets contributed to the demise.
A federal appellate court panel decided to overturn a major portion of the fraud and money laundering case against Sean Cutting, former CEO, and Brian Melland, former VP and Chief Loan Officer.
Their convictions will still be upheld, but the 8 year and 4-month federal prison sentences and $20 million in restitution could be voided. Federal prosecutors must now produce new evidence that proves beyond doubt that the convicts’ fraud scheme led to the bank closing. The bank executives are scheduled to be released in November 2025 if they are not released earlier.
Although it is not currently scheduled, the defendants will have a new sentencing.
Between 2004 and 2010, Sonoma Valley Bank lent a real estate developer, Madjlessi, more than $35 million, almost $25 million more than the legal lending limit set by the bank’s regulators. In an effort to conceal the loans, Melland and Cutting would have the bank approve multi-million dollar loans for nominee/straw borrowers. The loan proceeds would return to Madjlessi’s companies.
Madjlessi’s lawyer later got involved in the bank fraud scheme after conspiring to obtain a loan with the purpose of using the proceeds to purchase a prior loan that Madjlessi defaulted on from the FDIC.
Read our previous reporting:
Fraud Friday: Two Community Bankers and Two Borrowers Indicted for Bank Fraud April 11, 2014
Suspect in Sonoma Valley Bank Fraud Found Dead May 9, 2014
Fraud Friday – 8 Years in Jail for Community Bank CEO, CLO August 10, 2018