Former MidCoast Community Bank President James A. Ladio Tuesday pleaded guilty in U.S. District Court to four counts of bank fraud and money laundering.
Ladio, 57, north Wilmington faces, on two of the counts, up to 30 years; imprisonment, a fine of $1 million; and mandatory restitution. On the money laundering charges Ladio faces 10 years in prison and a fine of $250,000. Sentencing has been scheduled for April 17, 2014..
A release from the U.S. Attorney’s Office for Delaware described his actions as follows:
The first bank customer (Bank Customer A) applied in October 2010 to transform an existing commercial mortgage at MidCoast into a $700,000.00 line of credit. Although the loan package indicated that the purpose of the line of credit was to make capital improvements on a particular building project, the actual purpose of the request was for Bank Customer A to obtain funds which could be used to make a short-term loan to Ladio.
After MidCoast’s loan committee approved the request, Bank Customer A drew $650,000 from the line, which was deposited into Bank Customer A’s account on or about October 28, 2010. That same day, approximately $629,240.00 was wired from the account controlled by Bank Customer A to Ladio’s personal checking account.
Similarly, the second bank customer (Bank Customer B) applied to MidCoast in July 2011 for a working capital line of credit for $700,000. Although the loan package indicated that the purpose of the loan was for “working capital for Bank Customer B’s various business interests,” the actual purpose of the request was for Bank Customer B to obtain funds which could be used to make a short-term loan to Ladio.
After MidCoast’s loan committee approved the request, MidCoast wired $650,000 into a bank account held by Bank Customer B at another financial institution. That same day, $639,000 was wired from Bank Customer B’s account to Ladio’s personal bank account.
Because on each occasion the proceeds of the loan fraud activity resulted in more than $10,000.00 being deposited into Ladio’s personal bank account, Ladio also faces two counts of money laundering.
Ladio’s fraud was uncovered after it was discovered that he had failed to notify his lender, a TARP bank, that he had sold an investment property for which he had taken out a mortgage loan at the bank said Christy Romero, Special Inspector General for TARP. TARP was a federal program that purchased preferred stock in banks to shore up their finances following the financial crisis of 2008 and 2009.
The bank was not identified in court documents, but reports in the banking community an the News Journal identified the financial institution is Wilmington Trust. Problem loans at Wilmington Trust led to its “take-under” acquisition by M&T Bank.
Earlier, Bryn Mawr Bank Corporation and MidCoast dropped a $33 million merger that was announced in the spring. Ladio was terminated from the bank at about the time the merger plans were dropped. At the time, there were reports of a search of Midcoast by law enforcement.
A recent Federal Deposit Insurance Corp. report and analysis by the Investigative Reporting Project at American University showed that MidCoast posted a loss of $229,000 and carries $4 million in troubled assets. This compares to less than $400,000 in troubled assets in 2012. The ratio of troubled assets rose to 16, compared to a 9 national average and 1.5 at MidCoast in 2012.
Ladio, a formerly with Artisans’ Bank founded MidCoast in 2007. It is the newest bank in Delaware.
The bank was known for keeping a low profile, operating from an office on Kirkwood Highway between Newark and Wilmington for a few years. It later opened a headquarters and office on the Wilmington Riverfront, as well as offices in north Wilmington and Dover.
The case was investigated by the Federal Bureau of Investigation, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Internal Revenue Service Criminal Investigation Division, and is being prosecuted by Assistant United States Attorneys Robert F. Kravetz, Lesley F. Wolf, and Ilana H. Eisenstein.
