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Cross linked www.washingtonpost.com
By Associated Press, Published: July 12th, 2012
Those indicted include former chairman and CEO Edward J. Woodward; former executive vice president and chief lending officer Simon Hounslow; and several others.
The indictment unsealed Thursday says the bank set a goal of becoming a billion dollar bank within three years and that by 2009 its assets more than doubled to about $1.3 billion. Most of that growth occurred through brokered deposits, a financial tool that allows investors to pool their money and receive higher rates of return. However, because those deposits are highly volatile, a bank needs to remain well-capitalized to accept and renew brokered deposits.
The indictment says that many of the bank’s loans were funded and administered without regard to industry standards or the bank’s own internal controls. By 2008, the volume of the bank’s troubled loans and foreclosures soared, according to the indictment.
“However, bank insiders were unwilling to fully acknowledge the deterioration in the bank’s loan portfolio. In particular, they were concerned that the bank’s declining health would negatively impact investor and customer confidence, and that capital erosion would affect the bank’s ability to accept and renew brokered deposits,” the indictment says.
The indictment says top executives masked non-performing assets at the bank for their own personal benefit and to the detriment of the bank, which ultimately helped lead to its collapse. Among other things, the indictment says they conspired to conceal the bank’s true condition by funneling bank-owned property to troubled borrowers and overdrawing demand deposit accounts to make loan payments.
The indictment says the bank’s failure will cost the federal government more than $260 million through an insurance fund.
“For more than 30 years, this community put their trust — and their money — in the Bank of the Commonwealth. These charges portray a bank leadership that betrayed that trust for their own profit at the detriment to their own bank, its shareholders and the community it served,” U.S. Attorney Neil MacBride said in a prepared statement.
Woodward served as the bank’s CEO and chairman of its board of directors for more than 30 years until he was forced to step down as chairman in April 2010 and then ultimately forced to retire in December 2010. In addition to the fraud conspiracy charge, he also faces charges for false entry in a bank record, multiple counts of unlawful participation in a loan, multiple counts of false statement to a financial institution, and multiple counts of misapplication of bank funds.
Hounslow was the bank’s executive vice president and chief lending officer. The indictment says he was responsible for operating the bank in a safe manner and keeping the board of directors informed about the bank’s financial condition. He is also charged with misapplication of bank funds, false statement to a financial institution and multiple counts of false entry in a bank record.
Among other things, the indictment says Woodward, Hounslow and Stephen G. Fields, a former executive vice president and commercial loan officer, removed millions of dollars in loans from a past-due report before it was presented to the bank’s board of directors. Also facing charges is Woodward’s son, Troy Brandon Woodward, who was a vice president and mortgage loan specialist until January 2011.
The indictment says bank insiders provided preferential financing to troubled borrowers who were already having difficulty making payments on their loans so they could purchase bank-owned property.
Also indicted were troubled borrowers Thomas E. Arney, who leased office space at the bank’s headquarters and owned a residential development company, and Dwight A. Etheridge, who owned and operated a residential and commercial development company, as well as an employment staffing company.
If convicted, the maximum possible sentence is 30 years in prison. It was not immediately clear Thursday whether those indicted had attorneys. — end of article
All Rise! The Honorable Judge Wright has left The Courtroom of Public Opinion!
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