Mug Shot Monday – Borrower in Bank of Commonwealth Fraud Gets Bankers Gets 50 Months in Jail

September 23, 2013

By Bob Coleman
Editor, Coleman Report

Another sentence is in for the Bank of Commonwelth fraud convictions.

A borrower co-defendant will serve a little over four years in jail. The sentence was announced the same week as a former senior loan officer drew a 17 year sentence.

Unlike other borrowers, which the feds flipped, Dwight Etheridge was named a co-defendant with the other community bankers.

He was found guilty of conspiracy to commit bank fraud, bank fraud, false statements to a financial institution, and aiding and abetting misapplication of bank funds.

Says the FBI, “The evidence presented at trial demonstrated that Etheridge conspired with numerous Bank of the Commonwealth insiders to engage in an illegal reciprocal relationship where he performed favors to mask the Bank’s loan losses in exchange for preferential treatment.

“For example, at the request of Bank insiders and to prevent losses related to a failing loan, Etheridge arranged for his development company, Tivest, to purchase a construction project located at 310 24th Street in Virginia Beach. The Bank gave Tivest a $4.1 million loan to purchase and renovate this property. During the funding of this loan, Etheridge caused fraudulent construction draws to be submitted to the Bank which certain Bank insiders funded without inspecting whether Etheridge had completed the work. In one draw request, Etheridge requested monies for a “final clean” when the project stood as an empty shell wrapped in building wrap. Etheridge used construction loan proceeds to make payments on his other loans at the Bank, to support his staffing company, Genesis Staffing, to obtain thousands of dollars in cash, to make political donations, and to make charitable contributions.

“In exchange for performing this favor, the bank allowed Etheridge to amass large overdrafts without question, have easy access to millions in loans, and gave his company thousands of dollars to work on bank-owned property. As a result, Etheridge was able to prop up his failing businesses and portray himself as an upstanding, effective business leader. All the while, Etheridge was attempting to convince the Norfolk City Council to allow him to build a multi-million dollar office building called the MidTown Office Tower in the heart of Norfolk.

“Additionally, Etheridge also defrauded the Bank and a new market tax credit fund called Paramount Community Development Fund in connection with a construction project called the Villas at Broad Creek. After the City of Norfolk gave acres of land in the Broad Creek section of Norfolk for a nominal fee, Etheridge obtained a construction loan totaling $4,860,000 from Paramount where he promised to use the funds solely to construct a mixed use development project in the troubled Broad Creek neighborhood. Again, Etheridge caused fraudulent construction draws to be submitted to the Bank. Etheridge used a portion of the construction loan proceeds to support his staffing company, Genesis Staffing, to make payments on unrelated, overdue loans at the Bank, to cover large overdrafts at the Bank, to make political donations and to make charitable contributions.

“At the end of 2010, after the Bank could no longer fund loans to Etheridge, his businesses collapsed. Etheridge defaulted on millions of dollars of loans at Paramount and the Bank, laid-off his employees at Tivest, and he declared personal bankruptcy. As a result of the Bank’s failure, the Federal Deposit Insurance Corporation currently has suffered $333 million in losses to date.”

Former Chief Executive Edward Woodward and his son, Troy, who was a mortgage loan specialist will be sentenced later this month.