Fraud Friday – Pulaski Bank Victim of $7 Million Fake Lease Scheme


November 15, 2013

By Bob Coleman
Editor, Coleman Report

pulaskibankPulaski Bank self reported it has uncovered an elaborate fraud perpetrated against the Bank by one of its commercial loan customers.

The customer, who purported to be in the business of leasing equipment, created false documentation to purchase assets that did not exist and that were the subject of fictitious leases.

The bank’s exposure is an outstanding loan balance of $7 million less collateral of $631,000 that was in the Bank’s possession.

Although the bank discovered this information subsequent to the October 29, 2013 announcement of its results for the fiscal year ended September 30, 2013, the Company determined that the loans had been impaired at September 30, 2013 based on the new information.

As a result the bank will charge off the entire amount of the exposure that was determined to be unsecured effective September 30, 2013, resulting in an after-tax charge to earnings of $3.9 million.

Revised results for the fourth quarter of fiscal 2013 will be a loss attributable to common shares of $942,000, or $0.08 per diluted common share. For the full fiscal year ended September 30, 2013, revised earnings available to common shares will be $8.3 million, or $0.74 per diluted common share. Notwithstanding the reduced earnings resulting from this fraud, the Bank’s capital ratios remain above the level required to be considered “well-capitalized.”

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