Former Wilmington Trust President, Robert V.A. Harra and other executives have been indicted on federal charges related to concealing information on bad loans that eventually led to the sale of the landmark financial institution.
Click on the link below for a copy of the indictment.
The Associated Press reported Harra this week pleaded not guilty to the charges and was released on $25,000 bond.
A release from the U.S. Attorneys Office for Delaware stated that Harra, 66 of Wilmington; David Gibson, 58, of Wilmington and William North, 55, of Bryn Mawr, PA, and Kevyn Rakowski, 61, of Lakewood Ranch, FL were indicted for their alleged roles in concealing from the Federal Reserve, the Securities and Exchange Commission (SEC) and investors.
Harra and other executives had been named in a civil filing case from the SEC in May over similar allegations. Harra was the public face of the bank side of Wilmington Trust. The CEO of the company was Ted Cecala, who retired after the sale of the company.
The case involves, the “total quantity of past due loans on Wilmington Trust’s books from October 2009 until November 2010, prosecutors stated.
The 19-Count Superseding Indictment charges defendants with making false statements in securities filings and to agencies of the United States government.
All defendants are charged with conspiracy to defraud the United States, to commit fraud in connection with the purchase and sale of securities, and making false statements to regulators.
All defendants are charged with one count of false statements in connection with the purchase or sale of securities, four counts of making false entries in banking records, seven counts of making false statements to agencies of the United States government and two counts of making false statements in SEC reports.
Harra and Gibson are also charged with two additional counts of making false statements in SEC reports and Gibson is charged with three counts of falsely certifying financial reports.
North and Rakowski were previously charged with two counts of making false statements to an agency of the United States, relating to the concealment from the market and the Federal Reserve the total quantity of past due loans on the bank’s books during the months of October and November 2009.
According to the U.S. Attorney’s office, Wilmington Trust was required to report in its quarterly filings with both the SEC and the Federal Reserve the quantity of its loans for which payment was past due for 90 days or more. Investors and banking regulators consider the 90-day number in evaluating the health of a bank’s loan portfolio.
Harra, Gibson, North, and Rakowski helped conceal the truth about the health of Wilmington Trust’s loan portfolio from the SEC, the investing public and from the bank’s regulators, prosecutors allege.
The Superseding Indictment alleges that Harra, Gibson, North, and Rakowski participated in Wilmington Trust’s failure to include in its reporting a material quantity of past due loans, despite the reporting requirements and knowing the significance of past due loan volume to investors and regulators.
North, as the bank’s Chief Credit Officer, approved the exclusion or “waiver” of such loans from internal reports that he knew would be used to generate the bank’s external financial reports.
As the bank’s President and Head of Regional Banking, Harra allegedly encouraged the “waiver” of past due loans. He served as a primary point of contact with the bank’s regulators during 2009 and 2010, signed bank regulatory filings, participated in quarterly earnings calls with investors, and did not disclose the bank’s failure to report “waived” loans, prosecutors said.
As Chief Financial Officer, Gibson, also knew the bank had “waived” loans from public reporting and failed to disclose this. Despite this knowledge, Gibson helped to draft and approved SEC filings and certified that those same filings fairly presented the financial condition of Wilmington Trust.
Rakowski, as Controller, approved the bank’s filings with the SEC and the Federal Reserve knowing that those reports did not include past due loans that had been “waived.”
In November 2010, Wilmington Trust was acquired by M&T, out of Buffalo, NY, at a discount of approximately 46 percent from the bank’s share price the prior trading day. Hundreds of jobs were eliminated as M&T worked to resolve problem loans and injected capital.
In announcing the Superseding Indictment, United States Attorney for the District of Delaware Charles M. Oberly, III, stated, “This Superseding Indictment marks the next significant step in our investigation into the illegal conduct by at Wilmington Trust. The failure by these individuals to properly inform regulators and investors about the true financial condition of Wilmington Trust resulted in significant harm to those investors and losses to the Delaware community. As high-ranking bank executives, these individuals had an obligation to accurately report important financial metrics which enable investors to make informed decisions. Even in the wake of the financial crisis, their deception was neither permissible nor excusable.”
“The criminal charges filed today allege that four senior executives of a TARP bank did not want to face the consequences of telling the truth about past due loans on the bank’s books, and in reporting to regulators, investors and shareholders,” said Christy Romero, special inspector general for TARP (SIGTARP). “These TARP bankers allegedly engaged in a practice of waiving past-due loans from their external reports, and making mass extensions of past-due loans with limited – if any – underwriting and many lacking updated appraisals. In 2008 Treasury, on behalf of American taxpayers, invested $330 million in TARP bailout funds in Wilmington Trust. In 2010, the bank then turned to the market to raise capital using its falsely reported past due numbers. The bank was then sold at a severe discount, roughly half its discount from the prior day. Bankers across the nation were faced with declining economic conditions and rising past-due loans, and told the truth about those loans and losses. Bankers at Wilmington Trust did not.”
HARP injected capital into banks following the financial crisis of 2008 and 2009.
The case is being prosecuted by Assistant U.S. Attorneys Robert Kravetz and Lesley Wolf of the District of Delaware.
The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.
Why was Ted Cecala not indited. As CEO, he had to sign off on all financial reported documents with the CFO. Bob Harra was President and COO. Am I missing something here?
The investigation, based on statements from the US Attorney’s office, has not yet been concluded.