Former Top Loan Officer Convicted of Bank Fraud
Clayton A. Coe, 45, McDonough, Georgia, a former Senior Commercial Loan Officer for FirstCity Bank of Stockbridge, Georgia, which failed and was seized by the FDIC and state banking authorities in March 2009, pleaded guilty to bank fraud in connection with an $800,000 loan that he tricked FirstCity Bank’s Board of Directors into approving and from which he personally profited.
As previously reported on Mortgage Fraud Blog, Coe served as a Vice President and as Senior Commercial Loan Officer at FirstCity Bank between 2003 and its failure in March 2009. In this position, Coe was primarily responsible for recommending to the FirstCity Bank's loan committee approval of commercial loans to real estate developers.
In January 2005, Coe recommended that FirstCity Bank's loan committee approve a loan for $800,000 to a borrower to purchase and develop 16 lots in a DeKalb County, Georgia, subdivision. Coe concealed from FirstCity Bank's loan committee that this loan was part of the funding for a one-day land flip involving these and other lots in the subdivision from which he and his wife would make approximately $100,000. When the FirstCity Bank's loan closed on January 12, 2005, the borrower used the loan proceeds to purchase the 16 lots from a company that Coe and his wife owned and controlled. Coe and his wife used this company to purchase these lots earlier that same day from the true owner for a lower sales price. In addition, although Coe misrepresented to FirstCity Bank that the borrower would make a down payment, in reality the borrower received approximately $35,000 back when the one-day land flip closed.
Coe caused FirstCity Bank to sell, or “participate,” this loan to two other Georgia banks without disclosing his personal interest, the one-day flip, or that the borrower had received money back at closing. FirstCity Bank eventually repurchased this loan from the two participating banks. Coe eventually paid off FirstCity Bank’s loan to this borrower by causing the borrower to quitclaim the property to Coe in December 2006 and obtaining additional loans from other Georgia banks to retire the debt owed FirstCity Bank. Coe received approximately $100,000 in additional funds in connection with this round of financing.
Coe also pleaded guilty to filing a false federal income tax return with the IRS that omitted nearly a half million dollars of income from his job at the bank. During 2007, Coe received approximately $476,000 in commissions from FirstCity Bank from the loans that he originated as FirstCity Bank’s Senior Commercial Loan officer. Coe did not report these commissions, which were paid outside of the FirstCity Bank’s payroll process, on his 2007 tax return. Coe knew that these commissions were taxable income because he had reported to the IRS commissions that he had received in prior years. In 2010, upon being informed that he was a target of the criminal investigation, Coe amended his tax returns twice -- once falsely -- in a belated attempt to report this income. Coe would have owed an additional $122,000 in federal taxes in 2007 if he had reported them as he was required on his 2007 federal tax return.
On March 20, 2009, FirstCity Bank failed and was seized by federal and state regulators, despite unsuccessfully having sought $6.1 million in federal government assistance through the U.S. Department of the Treasury's Troubled Asset Relief Program (TARP) in February 2009. Coe was originally indicted in March 2011, along with FirstCity bank’s former President, Mark A. Conner, on 12 counts of conspiracy to commit bank fraud, bank fraud, and making a false statement to a financial institution. In superseding indictments returned in June 2011 and March 2012, the grand jury charged Coe with additional crimes, including two counts of making a false statement on his tax return. The June 2011 superseding indictment also added FirstCity Bank’s former inside attorney, Robert E. Maloney, Jr., as a defendant in the case. Conner tendered a guilty plea in October 2011, and his sentencing is set for July 12, 2012. A trial date has not been set for Maloney.
Coe tendered a guilty plea to one count of bank fraud and one count of making a false statement on his tax return. Coe could receive a maximum sentence of thirty-three years in prison and a fine of up to $1,100,000. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
Sentencing is scheduled for September 18, 2012, at 10 a.m. before United States District Judge Steve C. Jones.
The announcement was made by United States Attorney Sally Quillian Yates.
“Today’s guilty plea demonstrates that corrupt bank insiders will be held accountable for the damage they cause to their financial institutions and the country’s economy,” said U.S. Attorney Sally Quillian Yates. “This defendant used his position to make a bad bank loan to fund a one-day land flip from which he personally profited. This type of fraud, involving inflated real estate prices, did tremendous damage to our economy. He will now be punished accordingly.”
“The FDIC Office of Inspector General is pleased to have played a role in the investigation involving FirstCity Bank of Stockbridge,” said FDIC Inspector General Jon T. Rymer. “We are particularly concerned when bank officials in positions of public trust abuse their authority to carry out fraudulent activities that harm their banks and contribute to losses to the Deposit Insurance Fund. We are committed to working with our law enforcement partners in helping to maintain stability and public confidence in our nation's banks and bringing unscrupulous individuals like Mr. Coe to justice.”
“Mr. Coe not only exploited his position as Vice President and Senior Commercial Loan Officer for his own personal financial gain, he also utilized the financial system of the nation to conceal income and evade his taxes,” stated Rodney E. Clarke, Special Agent in Charge with IRS Criminal Investigation. “The IRS is committed to addressing financial fraud at every level, and is pleased to have been instrumental in this case.”
Brian D. Lamkin, Special Agent in Charge, FBI Atlanta Field Office, stated: “The public expects rogue bank officials to be held accountable for their actions. The defendant in this matter chose to abandon the trust bestowed upon him by FirstCity Bank of Stockbridge, Georgia, an FDIC insured institution, for reasons of personal greed and is being held accountable for those actions today.”
“Coe's greed helped drive FirstCity Bank into the ground,” said Special Inspector General Christy Romero of Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”). “He defrauded the bank to fund his ultimate payday and placed his interest in ill-gotten personal gain ahead of the interests of the bank, its customers, its investors, and the community the bank served. It's precisely that sort of behavior that has robbed the public of its confidence in the banking industry and its institutions, and for his fraud, Coe will be banned for life from ever again practicing banking.”
This case is being investigated by Special Agents of the FDIC, Office of Inspector General, IRS Criminal Investigations, the FBI, and the Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”).
Assistant United States Attorneys Douglas W. Gilfillan and David M. Chaiken are prosecuting the case.
source: Mortgage Fraud Blog