October 20, 2017
By Bob Coleman
Editor, Fraud Friday
Fraud Friday — Oregon Community Bank CEO, CFO Fraud Trial Begins
A retired Oregon community banker reported borrower and employee irregularities to the Feds in 2011.
Don Heine filed a Suspicious Activity Report with the Financial Crimes Enforcement Network and called the FBI to report his concern that possible criminal activity had occurred.
He thought he was a witness. Turns out the FBI made him a target. Don and his CFO, Sally Yates, were indicted in 2015 on 27 counts of bank fraud.
The trial is expected to last four to six weeks.
From the June 29, 2015 Coleman Report:
The indictment alleges the two conspired to bring $1.3 million delinquent loans current, thus hiding a number of bad loans from the Board of Directors and the regulators.
Several of the charges are from the sale of two bank OREO properties.
In 2010 a bank customer purchased two properties from the bank for $812,500. The bank provided 100% financing.
In 2011, the FDIC questioned the validity of the accounting of the transaction as the purchased did not meet the minimum equity requirements needed to remove the properties from the OREO account. CFO Yates said the borrower would make a down payment for the two loans.
The indictment alleges Yates sent a letter the bank’s CPA firm confirming receipt of the down payment.
“When, in truth and fact, no payments had been received.”
The bank eventually obtained the down payment from — yep, another side loan to the borrower. Money was transferred from the borrower’s account for a $37,500 down payment, a transfer the borrower now says he never knew about.
Two months ago, Dan Heine penned an op ed piece in response to reporting by the Oregonian.
“As was reported to the bank’s shareholders in the summer of 2012, the bank posted an operating loss stemming from internal irregularities that I discovered after the termination and departure of certain employees. I immediately notified our Board of Directors and called federal and state banking agencies and the FBI, which eventually lead to indictments for alleged criminal activities of a former employee before and after his employment with the bank. Thereafter, the bank’s board and management cooperated fully with an extensive two-year investigation.
The notion that I was personally involved in a scheme or scandal to conceal problem loans and delinquencies from the bank’s examiners is preposterous.”