The other shoe drops in Wilmington Trust case

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Good morning – It always seemed likely that another shoe would drop before the complex Wilmington Trust case went to trial.

That proved to be the case as M&T agreed to settle a troublesome criminal case against the predecessor bank it acquired for $300 million.

The settlement has M&T forking over a $60 million settlement to the feds and it leaves the remaining four defendants on their own.

The federal judge presiding over the case then agreed to delay the trial of the former executives until next year.

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Without Wilmington Trust-M&T as a part of the case, defendants who include former Wilmington Trust President Robert V.A. Harra, will have to argue that they were basically clueless about the status of bad loans that prosecutors allege were not properly reported to regulators.

The federal government was deeply involved in Wilmington Trust and that’s a problem for defendants. The status of the loans had to be reported to bank and securities regulators.

But the government had another card to play, thanks to its TARP investment in Wilmington Trust. TARP was the federal program that shored up the banking system after the financial crisis of 2008 through direct stock investments.

It adds up to a difficult case for both the government and defendants. We’ll see if this case actually goes to trial.

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