Mug Shot Monday – 10 Years for $14 Million Fraud for Former Key Bank Business Development Officer
July 7, 2014
By Bob Coleman
Editor, Coleman Report
Walter Fox was making a cool $100,000 as a BDO for Key Bank in Maine before he abruptly resigned in September 2012, emailing his supervisor, “This isn’t fun anymore. As of today, I resign.”
In a failed attempt to have his sentence reduced, his attorney provided the court with the attached sentencing memorandum.
This is the thorough account how he committed his crimes, and what he did with the money.
Scott engaged in a lengthy, but deceptively simple, scheme. He was employed by Casco Bank, which was later absorbed by KeyBank, where he managed existing loans, and obtained new accounts, and he managed approximately 31 accounts. Check out our coverage from February 2014.
Scott applied for, and received, fraudulent loans and lines of credit in the identities of four existing customers. He drew on the loans, increasing the loans limits and obtaining additional lines of credit to make payments on the existing loans and thereby maintain the scheme. He also created fraudulent collateral for the loans.
For the majority of the relevant time period, from 1985 through 2010, Scott was a loan officer, or ”relationship manager,” first at Casco Bank, and then at Key Bank when Casco Bank was absorbed. ln 2010, he became a “senior relationship manager.” Throughout those years, he engaged in the same process of obtaining commercial loans.
Scott submitted a “sale” or proposed loan to a sales manager.
The sales managers determined whether the proposed loan met Keybank’ s Community Development Lending” requirements.
The sales managers had direct, daily supervisory authority over Scott, and communicated with him by email and/or phone at least daily to discuss customer matters, as well as what Scott was working on at any given time. If the sales managers approved a proposed loan, the loan application was then sent to underwriting. If approved at that stage, the loan application was forwarded to the credit department for approval by an individual with up to $5,000,000 lending authority.
Scott had no loan authority at any time during his employment at KeyBank. This process was also used for any increases or renewals of lines of credit Scott similarly had no discretion regarding any LOCs.
Scott terminated his scheme in July of 2012 when his new boss denied an increase of the LOC of one of the accounts he managed because it was not consistent with KeyBank’s community development loan purposes.
Scott had no access to funds and the accounts he used to obtain the loans and withdraw money became delinquent. His boss became increasingly suspicious, and began applying pressure on him to put repayment plans in place or seek an exit strategy from the delinquent loans. At that point, Scott resigned his position at KeyBank.
From 2006 to 2011, Scott prepared and filed joint individual federal tax returns, as well as The Boathouse’ s S Corporation federal tax returns. On his individual tax returns, Scott identified his occupation as an executive, and on The Boathouse returns, be identified himself as its treasurer. Scott did not report the income he obtained from the fraudulent loans at KeyBank.
Throughout the course of the scheme, Scott obtained an average of $400,000 a year in illegal earnings. Scott used the proceeds not only to facilitate the scheme itself, but to pay for the lifestyle he believed Shirley, Charlie, Sara, and ultimately Cherish (an escort) required. He paid for a Disney Time Share when Charlie and Sara were young ($30,000), bought them new cars (twenty cars between 1986 and 2012), invested in a real estate development ($300,000), paid for annual Hawaiian vacations ($15,000 per year for fifteen years, totaling $225,000), and annual vacations to other parts of the world (totaling approximately $200,000), and Shirley spent around $2,000 a month on clothing for the family (totaling approximately $500,000). He bought a ski condo to provide a place for the family to spend time together on weekends, as his had done when he was growing up, and bought season passes each year for twenty years (approximately $40,000).
Scott paid for private education. Charlie attended Kent’s Hill School for three years ($90,000) and attended Carrabasset Valley Academy to compete in skiing for three years ($75,000).
Scott spent $90,000 on Charlie’s two years of college and $200,000 on Sara’s four years of college. He paid for Charlie’s rent for sixty months (totaling approximately $120,000). And Scott funded his family’s passion for sailing. Sailing gave his family an identity. He purchased seven sailboats over 25 years totaling approximately$805,000, financed two Olympic sailing campaigns for his children totaling approximately $500,000), and paid for Sara to live in Miami pursuing a sailing career for eighteen months (totaling approximately $27,000).
Scott also funded The Boathouse, the store he and his wife owned and ran together, which sold sailboats and boating-related items.
Beginning approximately ten years ago, Scott began engaging in sexual encounters with escorts. He ultimately purchased a home for Cherish.
His lawyer argued due to an abusive childhood, Fox was motivated to give people stuff. This mental impairment was the only way he could achieve happiness.
The Judge sentenced Fox to 10 years in prison saying that the sentence was needed to send a message, promote respect for the law and provide just punishment because Fox used the proceeds of his fraud to fund a lifestyle that most people cannot afford.
Read Fox’s sentencing memorandum here