Failed Stockbridge Bank Allegedly Fleeced Before Being Seized By Feds

ATLANTA—An indictment unsealed today charges two former top officers of FirstCity Bank of Stockbridge, Georgia—MARK A. CONNER, 44, formerly of Canton, Georgia, and CLAYTON A. COE, 44, of McDonough, Georgia—with a variety of offenses, including conspiracy to commit bank fraud and bank fraud in connection with misconduct at FirstCity Bank in the years before the bank’s seizure by state and federal authorities on March 20, 2009. In addition to the conspiracy and bank fraud charges, the indictment charges CONNER with conducting a continuing financial crimes enterprise at the bank between February 2006 and February 2008, during which CONNER’s and his co-conspirators’ crimes allegedly generated over $5 million in unlawful gross proceeds.

A federal grand jury in Atlanta returned the sealed indictment against CONNER and COE on March 16, 2011. CONNER was arrested on the charges and taken into custody by federal agents at Miami International Airport yesterday morning, the two-year anniversary of FirstCity Bank’s failure, upon his arrival in Miami from the Turks and Caicos Islands in the West Indies. CONNER made his initial appearance today before a federal magistrate judge in Miami, who preliminarily ordered CONNER to be detained as a flight risk pending his transfer by Deputy U.S. Marshals from Miami to Atlanta for trial. A formal detention hearing will take place in Miami on Thursday, March 24, 2011, at 1:30 p.m. COE’s initial appearance on the indictment in the Northern District of Georgia has not yet been scheduled.

United States Attorney Sally Quillian Yates said, “The entire country has felt the deep economic impact of failed banks. At the heart of this indictment is an abuse of power by key insiders, who are charged with tricking their own colleagues into approving millions of dollars in commercial loans to fund the defendants’ own personal business activities, and to enrich themselves at the bank’s expense. Along the way, these defendants also allegedly defrauded state and federal bank regulators and examiners, and at least 10 other federally insured banks in Florida and Georgia that invested in the fraudulent multi-million-dollar loans.”

FDIC Inspector General Jon Rymer said, “The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General (OIG) is pleased to join the United States Attorney’s Office for the Northern District of Georgia and our law enforcement colleagues in announcing this indictment. We are particularly concerned when former senior bank officials, who have held positions of trust within their institutions, are alleged to have been involved in criminal activity. We will continue to aggressively pursue bank officials and others who victimize financial institutions.”

Neil Barofsky, SIGTARP Special Inspector General for the Troubled Asset Relief Program said, “Today’s indictment marks yet another occasion where bank executives are alleged to have turned to criminal fraud in the midst of the financial crisis, including an attempt to obtain millions of dollars from the American taxpayer through the Troubled Asset Relief Program. SIGTARP will continue to work with our law enforcement partners to bring those who engage in such crimes to justice.”

IRS-Criminal Investigation Special Agent in Charge Reginael McDaniel said of the case, “Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with other people’s money. Those individuals who engage in this type of financial fraud should know they will not go undetected and will be held accountable.”

According to United States Attorney Yates, the charges, and other information presented in court: CONNER served in a variety of top positions at FirstCity Bank between 2004 and 2009, including as vice-chairman of the board of directors, as a member of the banks’ loan committee, as president, and later as acting chairman and chief executive officer. COE served as a vice-president and as FirstCity Bank’s senior commercial loan officer. While serving in these positions, CONNER, COE, and their co-conspirators allegedly conspired to defraud FirstCity Bank’s loan committee and board of directors into approving multiple multi-million-dollar commercial loans to borrowers who, unbeknownst to FirstCity Bank, were actually purchasing property owned by CONNER or COE personally.

The indictment charges that CONNER, COE, and their co-conspirators misrepresented the essential nature, terms, and underlying purpose of the loans and falsified documents and information presented to the loan committee and the Board of Directors. CONNER, COE, and their co-conspirators then allegedly caused at least 10 other federally insured banks to invest in, or “participate in” the fraudulent loans based on these and other fraudulent misrepresentations, shifting all or part of the risk of default to the other banks. COE’s bonus compensation was tied to the origination of FirstCity Bank loans, including the fraudulent loans with which he and CONNER allegedly assisted each other.

In the process of defrauding FirstCity Bank and the “participating” banks, CONNER, COE, and their co-conspirators allegedly routinely misled federal and state bank regulators and examiners to conceal their unlawful scheme. They also unsuccessfully sought federal government assistance through the U.S. Treasury Department’s Troubled Asset Relief Program (“TARP”) and engaged in other misconduct in an attempt to avoid seizure by regulators and prevent the discovery of their fraud.

The charge against CONNER for conducting a continuing financial crimes enterprise carries a mandatory minimum sentence of 10 years in federal prison, a maximum sentence of life in prison, and a potential fine of up to $10 million. The conspiracy and bank fraud charges against CONNER and COE, and a remaining charge against COE for fraudulently influencing the actions of a federally insured bank, carry a maximum sentence of 30 years in prison and a potential fine of up to $1 million on each count. In determining the actual sentences for each defendant, the court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Members of the public are reminded that the indictment only contains charges. The defendant is presumed innocent of the charges and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being investigated by special agents of the FDIC, Office of Inspector General; the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), the Federal Bureau of Investigation, and Internal Revenue Service-Criminal Investigation.

Assistant United States Attorneys Douglas W. Gilfillan and David M. Chaiken are prosecuting the case.

For further information please contact Sally Q. Yates, United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

BEND, OR- According to government studies by the Federal Deposit Insurance Company (FDIC), the General Accounting Office (GAO) and others, mortgage loan fraud and home loan errors are costing average Americans 8 to 10 billion every year.

The most common home loan errors range from data entry and accounting errors to amortization and date errors. Some mortgage statements should be reviewed monthly while others can be checked for errors several times annually depending on the type of mortgage.

“After reading a recent study conducted by the State of New York regarding how many hard working people were being overcharged on their mortgage payments, I knew I had to help find a solution to help people recover the funds, ” said Andrew Way, Managing Director of http://www.BankBlunders.com. “I was astonished to see how many people were actually owed money by mortgage lenders. This is money they would never see unless they knew the problem existed and had access to the knowledge and the tools to fix it.”

A proprietary software package, the Refund Recovery System, was designed to scour through personal mortgage loan statements looking for errors and omissions on loans of all sizes and types. Once errors are discovered, affected homeowners are provided with the necessary forms and printouts of calculation errors to submit to lenders for instant cash recovery.

About Bank Blunders:
BankBlunders.com is dedicated to helping homeowners in the U.S. learn how to recover costs associated with mortgage loan errors and overcharging. The primary focus is using their proprietary software and educational information to search out errors in loan documents to recover any over payments due to homeowners. To learn more about mortgage loan fraud, visit www.BankBlunders.com

The final rule implementing the federal registration provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act) takes effect on October 1, 2010. Institutions will be expected to implement appropriate policies, procedures and management systems to ensure compliance.

The final rule will be codified as a new subpart B to Part 365 of the FDIC’s Rules and Regulations (12 C.F.R. Part 365), available at: http://www.fdic.gov/news/news/press/2010/pr10170a.pdf.

Final Rule Supplementary Information Footnote Correction by the Federal Register (August 23, 2010): http://edocket.access.gpo.gov/2010/pdf/C1-2010-18148.pdf.

Applicable mortgage loan originators (MLOs) must register with the Nationwide Mortgage Licensing System & Registry (NMLS) within 180 days of the date the NMLS can begin accepting registrations, which could be as soon as January 28, 2011. The FDIC will provide advance notice of the exact date.

At this time there is no action required in the NMLS of any mortgage loan originator who is an employee of a federally insured depository institution or a subsidiary that is owned and controlled by such an institution and regulated by a Federal banking agency.

At this time registration is not yet possible in the NMLS for any mortgage loan originator who is an employee of a federally insured depository institution or a subsidiary that is owned and controlled by such an institution and regulated by a Federal banking agency. Watch for announcements from FDIC and NMLS and frequently monitor the NMLS website, Federal Registration section, for specific and useful technical information on how to accomplish registration. http://mortgage.nationwidelicensingsystem.org/fedreg/Pages/default.aspx

FDIC, Federal Deposit Insurance Corporation
Office of Inspector General,
Office of Evaluations,
3501 Fairfax Drive, Arlington, VA 22226-3500
DATE: February 4, 2010

SUBJECT: The FDIC’s Loan Modification Program

This report presents the results of our evaluation of the FDIC’s Loan Modification Program (LMP). In 2008, the FDIC initiated a systematic and streamlined approach to loan modifications at IndyMac Federal Bank, FSB (lndyMac), in order to place borrowers into affordable, long-term mortgages while achieving an improved return for bankers and investors compared to the results of foreclosure. In February 2009, President Obama tasked the Department of the Treasury (Treasury) with program responsibility for developing and implementing uniform guidance for loan modifications across the mortgage industry based, in part, on the FDIC’s work at IndyMac. Since November 2008, the FD IC has required most purchasers of failed bank assets to implement the FDIC’s LMP, Treasury’s Home Affordable Modification Program (HAMP), or some other loan modification program acceptable to the FDIC.

BACKGROUND

In 2008, the FDIC developed the LMP after taking over as conservator for IndyMac to achieve improved value for the IndyMac Federal conservatorship by turning troubled loans into performing loans and, thereby, avoiding unnecessary and costly foreclosures. The FDIC LMP requires that a successful candidate for loan modification result in a (1) positive net present value (NPV) as opposed to a foreclosure option and (2) monthly payment representing no more than 31 percent of the borrower’s gross monthly income, known as the front-end debt-to-income ratio. The FDIC LMP utilizes a “waterfall” approach to reach the 31-percent ratio, by first lowering the borrower’s interest rate, then extending the term of the loan not to exceed 40 years, and finally forbearing principal to the end of the loan period. FDIC officials have noted that a critical characteristic of the FDIC LMP process is that it has to be straightforward and efficient in order to modify a large number of “at-risk” mortgages in a short period of time.

In February 2009, the Obama Administration announced The Homeowner Affordability and Stability Plan, a $75 billion federal program designed to provide for a sweeping loan modification program targeted at borrowers who are at risk of foreclosure. The plan tasked Treasury with developing and implementing uniform guidance for the government’s loan modification efforts. Treasury announced its HAMP guidelines on March 4, 2009, which built on the work of Congressional leaders and the FDIC’s LMP. Treasury’s HAMP uses the FDIC LMP 31-percent “waterfall” process and the NPV test. However, HAMP also provides various incentive payments to the loan servicer and borrower for achieving sustainable loan modifications.

Under Treasury’s HAMP, the Federal National Mortgage Association (Fannie Mae) serves as the financial agent and fulfills the role of administrator, record-keeper, and paying agent for the program. The Federal Home Loan Mortgage Corporation (Freddie Mac) is the compliance agent for the program and is responsible for ensuring that participating servicers comply with Treasury’s guidelines.

As of August 2009, Treasury had signed Servicer Participation Agreements (SPA) with 38 servicers, who, along with 2,300 servicers of Fannie Mae and Freddie Mac loans, account for more than 85 percent of the mortgage market.1 In an August 2009 report, Treasury stated that more than 230,000 trial modifications had started and that the program was on pace to help 3 to 4 million homeowners over the next 3 years.