January 23, 2015
By Bob Coleman
Editor, Fraud Friday
I have written numerous times of equity injection fraud where down payments mysteriously appear from borrowers who don’t have the financial resources — on paper.
Seems the Chairman and CEO of a failed community bank in Pennsylvania tried to pull off a similar con to support a TARP loan back in 2009.
Says SIGTARP, “The investigation conducted by SIGTARP and our partners unraveled what is charged in the indictment – a major fraud against the United States by the president/CEO of NOVA Bank, Brian Hartline, with the sole purpose of duping Treasury to get TARP bailout funds. Hartline is alleged to have orchestrated a fraud with the bank’s former chairman Barry Bekkedam to use the bank’s own money to try and raise $15 million in private capital as a condition for obtaining TARP funds. This is exactly the type of TARP fraud that Congress created SIGTARP to combat.”
Bekkedam and Hartline formed NOVA Bank in 2002.
Bekkedam also owned and operated a financial advisory company, Ballamor Capital Management, and allegedly advised Ballamor clients to invest in NOVA. But in 2008, NOVA faced risk of failure because of bad loans and investments.
Its investors were at risk of losing their investments.
In October 2008, NOVA Bank, applied for $13.5 million in TARP funds.
In June 2009, NOVA Bank was approved to receive the TARP funds on the condition that the bank raise $15 million in additional, private capital. The bank was ultimately unable to raise private capital, did not receive TARP funds, and in October 2012, the bank failed and was closed by state and federal banking regulators.
According to the indictment, Bekkedam and Hartline devised a scheme in which NOVA would loan money to G.L., a Florida businessman, for G.L. to transfer to NOVA’s parent company so it would appear as though the bank had received new capital from an outside investor. On June 30, 2009, NOVA wired $5 million to G.L.’s bank account in Florida, and approximately two hours later, G.L. wired $5 million to an account used for investments in NOVA Financial Holdings, Inc. It is further alleged that in October and December 2009, Bekkedam and Hartline convinced two others to make similar “investments” using loans from NOVA, in efforts to make NOVA appear more financially sound than it actually was.
The defendants also allegedly told and directed employees to tell the Treasury Department that NOVA had raised new capital when it had not. According to the indictment, the defendants concealed the true purpose of the loan to G.L. and falsely stated the purposes of the other two loans.
The ex-bankers face 55 to 115 of years in jail and millions of dollars in fines.