It has been interesting to watch the reaction to the drip, drip, drip of prosecutions and civil actions involving the former Wilmington Trust.
The latest sign of the extent of the problems came with an $18.5 million settlement of a civil case involving a scheme to hide loan losses from regulators and shareholders. (See story on page 3).
So far, we have seen a tinge of nostalgia, a rather puzzling reaction, but perhaps understandable as we try to absorb the dimensions of the debacle.
Many of us seem to relish the days when Wilmington Trust was part of Delaware being the so-called Duchy of DuPont that had family members and the company touching almost every sector of the economy and government. That included ownership of the News Journal at a time when a newspaper monopoly meant something. The situation began to change when the interlocking ownership between General Motors, DuPont and the family was broken up for antitrust reasons.
Over the years, DuPont heirs multiplied and one of America’s largest fortunes ended up in the hands of more and more people, many of whom were not interested in Delaware.
The company itself changed and faced a global market that put pressures on costs and made a 25,000-strong work force in the state impossible to maintain. The head count is now at fewer than 9,000, depending on how you count allied services.
During this period, Wilmington Trust faced its challenges, but was fortunate enough to have Bernard Taylor right the ship. Wilmington Trust went on to rack up a string of earnings gains that were the envy of the financial services industry. But pressures were already in place in the financial services industry.
Wilmington Trust needed to grow its trust business originally designed to serve duPont family members, while expanding a smallish regional bank under Floridian Ted Cecala and veteran banker Robert Harra as CEO and president respectively.
By most accounts, Harra headed the banking side, with Cecala working to grow the wealth management business and expand the bank into nearby areas in terms of loans,
Sussex Trust was added to beef up the downstate presence, but expansion outside the state on the banking side seemed to be a mixed bag with branches outside the state sold off. The wealth management business continued to grow as offices and companies were acquired.
The company, by other accounts, had a top-heavy management structure that had grown during the days of continuous earnings gains.
But something went terribly wrong in the lending area as a lack of financial controls, persons of poor character lending to one another and loans for raw land contributed to an unmanageable situation as the real estate market slowed down in Sussex County in 2004 and 2005. Based on court documents, efforts were made to conceal the seriousness of the situation. Click here for a link to previous stories.
After the financial crisis of 2009, the problems were all too clear as many loans went bad and the truth came to light on others.
Wilmington Trust was sold in what was called a $300 million “take under” to Buffalo’s M&T as regulators and prosecutors began peeling the onion and finding it was more spoiled than previously thought.
In the meantime, hundreds of jobs were lost and long-time M&T CEO had to caution locals bristling at the thought of an out of town bank taking charge that Wilmington Trust was in dire condition when the larger bank stepped in.
The investigations remain ongoing and we will know more in coming months and perhaps years.
As time goes on, one can hope that nostalgia is replaced by anger and disgust that a fine financial institution met such a ignoble fate and contributed to the current economic weaknesses in Delaware. – Doug Rainey
