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Mortgage Bankers and Florida Attorney Sentenced to Prison for Bank Fraud Scheme

loansafe.org | September 4, 2014

By Alex Ferreras

The US Department of Justice recently announced that two bankers from two separate states, and a Florida attorney were all sentenced to prison for various fraud charges in relation to a large bank fraud scheme.

According to the USDOJ, Donald Terry Dubose, a Chairman and Chief Executive Officer of a Panama City Beach based bank holding company called Coastal Community Investments (CCI) from Panama City Beach, Florida, was sentenced to four years in prison for conspiracy, seven counts of wire fraud, three counts of making false statements to the FDIC, and one count of filing a false claim with the FDIC.

Elwood Ladon West, a Chief Financial Officer and shareholder of CCI from Monroeville, Alabama was sentenced to three years in prison for seven counts of wire fraud, three counts of making false statements to the FDIC, and one count of filing a false claim with the FDIC.

Finally, Frank Alfred Baker of Marianna, Florida, who was an attorney and CCI’s second largest shareholder, received a total of 48 months in prison for conspiracy, four counts of wire fraud, one count of making false statements to the FDIC, and one count of filing a false claim with the FDIC.

All three defendants were also sentenced by the Court to serve a period of three years’ supervised release following their imprisonment, and ordered to pay $4,538,399.09 in restitution to the FDIC.

According to the original source released by the Justice Department, the trio in this case committed fraud against the federally created FDIC Temporary Liquidity Guarantee Program (TLGP). When the financial crisis reached its peak in October 2008, the TLGP generated hope that banks and financial institutions would regenerate the practice of lending to each other in order to regenerate the economy. Under this code, the FDIC guarantees loans that a lender provides to another financial institution (the borrower) in an amount up to 125% of the borrower’s existing unsecured debt.

CCI owned Coastal Community Bank based in Panama City Beach, Florida and Bayside Savings Bank based in Port St. Joe, Florida. Both scheme related financial institutions failed on July 30, 2010. However, the evidence presented at the trial proved that back in October 2008, CCI landed a $3 million secured loan with RBC Bank, which was secured 100% by both Coastal Community Bank and Bayside Savings Bank stock. To prevent RBC from securing the stock when their loan went into default, the guilty defendants falsely told the FDIC that the RBC loan was unsecured. In reality, everyone involved knew that it was secured. The fabrication would also allow the trio to receive an FDIC-guaranteed loan under the TLGP.

Deliberate fabrications allowed the borrowers to obtain a $3,750,000 loan from central Florida-based Center State Bank under the TLGP rule, which also represented 125% of the RBC loan. The TLGP loan proceeds were used to pay back the RBC loan.

When default occurred in June 2010, CenterState Bank followed suit by filing a claim with the FDIC for full repayment plus interest. Approximately $3,805,833.34 in principal and interest was wired by the FDIC to CenterState following the pending of the claim.

United States Attorney Pamela Marsh released a statement through the Florida Justice Department which stated that crimes like this committed by insider professionals is intolerable. It is certainly true, that the creation of perks such as the TLGP rule were not created for this type of activity.

Matt Alessandrino, Assistant Inspector General for Investigations, FDIC, extended his thanks to the representatives from Federal Reserve—Office of the Inspector General, the Federal Bureau of Investigation, the FDIC, and the Office of the Special Inspector General for the Troubled Asset Relief Program for their participation in investigating this case.

This case was prosecuted by Assistant U.S. Attorneys Gayle Littleton and Ryan Love, with the invaluable assistance of Federal Reserve—Office of the Inspector General Special Agent, Amy Whitcomb.

 

Back to September 2014 Archive

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