David Saks: BANKER GETS SIX YEARS IN PRISON FOR LOAN FRAUD

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BANKER GETS SIX YEARS IN PRISON FOR LOAN FRAUD

Banker Gets 6 Years for Loan Fraud

S. Pope Cleghorn, Jr., 39, Villa Rica, Georgia, was sentenced by United States District Judge Timothy C. Batten, Sr. to serve 6 years in federal prison on charges of bank fraud in connection with a real estate development project and a loan for a personal residence.  Russell T. Long, 53, Destin, Florida, previously pleaded guilty to conspiring with Cleghorn to defraud the bank.

Cleghorn was sentenced to 6 years in prison to be followed by 5 years of supervised release, and ordered to pay restitution of $2,424,301.67 to SunTrust Bank, which acquired Hometown Bank in 2008.  He was also ordered to perform 80 hours of community service. Cleghorn was convicted of these charges on September 6, 2011, after pleading guilty.  Long pleaded guilty to conspiracy on February 17, 2011, cooperated with the investigation, and is scheduled to be sentenced on December 15, 2011, at 10 a.m., before Judge Batten.

According to the charges and other information presented in court:  After becoming the President and Chief Executive Officer of Hometown Bank of Villa Rica in 2002, Cleghorn defrauded the bank by issuing multiple loans to Long and then misappropriating the funds from those loans, all without the knowledge or authorization of Hometown Bank’s loan committee.  As part of his scheme, Cleghorn directed that the minutes of loan committee meetings be falsified to indicate that loans to Long had been approved when in fact the committee had not approved, and was not even aware of, the loans.  According to Long, he paid Cleghorn over $130,000 in cash kickbacks for making the loans.

The bank fraud charges involve two loans Cleghorn approved for LongThe first was a $1 million development loan issued in February 2005 for Long to develop a subdivision in Wetumpka, Alabama.  The loan required Long to submit invoices, or draw requests, showing that costs were to be incurred for work on the subdivision, specifying the work that was to be done, and stating the amount of money needed for the work.  At Cleghorn’s direction, Long submitted fraudulent draw requests to Hometown Bank, falsely claiming that he needed money for streets, storm drains, lights, and other projects that were never constructed at the Wetumpka subdivision. 

Cleghorn and Long instead drew money from the loan for purposes other than the subdivision and used the money to pay off other loans Long held at Hometown Bank.  Cleghorn also drew money from the loan to pay off a personal credit card.  Although the false draw requests were dated 2005, they were actually prepared and submitted to Cleghorn in 2007 when the FDIC was at Hometown Bank performing a bank examination.  Cleghorn asked Long to create the phony draw requests to add to the file during the examination.

The second loan was a $1.8 million residential loan Cleghorn approved for Long to build a personal residence in Destin, Florida.  Long later obtained a second mortgage on the residence through another bank.  Without the knowledge of Hometown Bank’s loan committee, Cleghorn signed and filed a “Subordination of Mortgage” with the county clerk in Florida subordinating Hometown Bank’s loan to the other bank’s.  That filing caused Hometown Bank to lose its priority position in the event of foreclosure.  Cleghorn did not place a copy of the subordination document in Hometown Bank's files, and later tried to hide it from Hometown Bank and the FDIC.  During the January 2007 FDIC examination, when FDIC officials repeatedly tried to fax a copy of the Subordination of Mortgage to the bank, Cleghorn claimed that the fax machine was not working.  In truth, however, Cleghorn instructed his assistant to destroy the document when it came through on the fax machine, but then lied to the examiners about the fax.

United States Attorney Sally Quillian Yates who announced the sentence said of the case, “Corrupt bank insiders wreak havoc both in the institutions they serve and on the country’s economy as it strives to recover.  Their position of trust gives them the needed access to cause tremendous damage and the ability to conceal their crimes once committed.  This defendant, the President and CEO of a Georgia bank, made bad loans to a crony who later admitted he paid cash kickbacks in exchange for the special treatment.  For years, the defendant took extraordinary efforts to cover up his fraud with phony documents and lies, but with today’s prison sentence, he has now been brought to justice.”

Jon T. Rymer, the Inspector General of the Federal Deposit Insurance Corporation, said, “Today's sentencing reflects fitting punishment for a former banker who violated the trust of his community by engaging in criminal activity.  Such fraudulent behavior undermines the overall health of the banking system, and the FDIC OIG will continue to pursue such offenders, in the interest of ensuring the safety and soundness of the nation's banks.”

This case was investigated by Special Agents of the Federal Deposit Insurance Corporation – Office of Inspector General.

Assistant United States Attorney Stephen H. McClain prosecuted the case.

Courtesy Mortgage Fraud Blog




David Saks



Time&Temp Memphis

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Comment balloon 0 commentsDavid Saks • November 23 2011 01:42AM

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