Former Bank CEO Admits Role in Straw Buyer Scam
Reginald R. Harper, 58, Hammond, Louisiana, pled guilty to one count of conspiracy to commit bank fraud before U. S. District Judge Nannette Jolivette Brown.
According to court documents, in approximately 2004, Harper, the former President and Chief Executive Officer of First Community Bank, loaned in excess of $2 million to co-defendant Troy Fouquet, a local real estate developer, or one of a number of companies owned or controlled by Fouquet. The purpose of the loans was to purchase parcels of real estate; develop them into subdivisions; and build houses on them, eventually to be bought by prospective home buyers, who would obtain permanent mortgages to finance the purchase. The permanent mortgages would pay off the original loans made by Harper on behalf of First Community Bank and also include monies to pay Fouquet.
According to the court documents, however, beginning in 2005, it became difficult for Harper and Fouquet to identify qualified home buyers to obtain permanent mortgages. As a result, Harper and Fouquet developed various methods to avoid reporting the delinquency on the loans made by Harper, on behalf of First Community Bank, to Fouquet and/or his companies.
One method used by the defendants, according to court documents, included Harper making "loans" to the prospective home buyers to make it appear to the permanent mortgage lender they were trying to qualify that the prospective home buyer had more funds on hand than they actually did.
Another method employed by the defendants, according to court documents, was to use "nominee" loans or "straw" borrowers to sign up for new First Community Bank loans, authorized by Harper, the proceeds of which were then utilized to pay off the original loans made to Fouquet and/or his companies. Finally, another method used by the defendants to avoid reporting the delinquency of these loans, according to court documents, included Fouquet presenting Harper with insufficient checks (i.e. a check not backed up with sufficient funds) and Harper accepting them, crediting the loan payment in First Community Bank's books and records, despite knowing the check was insufficient.
The fraudulent methods employed by the defendants, as set forth in court documents, led to a false call report (a report of First Community Bank's financial health), which impacted an application undertaken by the bank to receive funds from the Troubled Asset Relief Program (TARP), a program administered by the United States. Ultimately, according to court documents, when the wrongdoing employed by the defendants was uncovered, First Community Bank suffered severe financial losses.Harperfaces a maximum penalty of up to five (5) years imprisonment, a $250,000 fine, and a $100 special assessment, respectively. Sentencing has been scheduled for September 13, 2012 at 10:00 AM.
U. S. Attorney Jim Letten announced the guilty plea.
The case was investigated by agents from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and agents from the Federal Bureau of Investigation.
The case is being prosecuted by Assistant U. S. Attorney Matt Chester.
"The onset of the financial crisis was a crossroads for many bank executives," said Christy Romero, Special Inspector General at SIGTARP. "Executives had the choice of writing off losses on bad loans or covering up those losses through fraud. Harper chose the latter and concealed the status of the loans from others at First Community Bank, from the bank's regulators, and in the bank's TARP application. Bank executives who abdicated their fiduciary duties helped lead our nation's financial industry into crisis, and SIGTARP and our partners in law enforcement will ensure that justice is secured for those seeking to exploit TARP."
source: Mortgage Fraud Blog