A federal jury found four former Wilmington Trust executives guilty on fraud and conspiracy charges., WHYYand other media outlets reported.
Defendants were Robert Harra, David Gibson, William North and Kevyn Rakowski. They were accused of hiding millions of dollars in bad loans on the bank’s books from the Federal Reserve, the Securities and Exchange Commission and the public between October 2009 and November 2010.
Harra was president of Wilmington Trust and a respected member of the Delaware banking and civic community.
After six days of deliberations, a Wilmington jury delivered the verdict on all charges.
An 18-count indictment charged the defendants with lying in securities filings and to agencies of the federal government; conspiracy to defraud the U.S., to commit fraud in connection with the purchase and sale of securities; making false statements to regulators; and a host of related charges.
Prosecutors said the defendants worked to hide the true volume of past due loans on a “second set of books.”
By the end of 2009, the bank reported only $10.9 million in bad loans, while waiving more than $360 million, prosecutors alleged. The bank also raised $287 million in investments without disclosing its financial problems to investors, they said.
Defense attorneys argued the defendants did share past-due loan information with the Federal Reserve and auditors, pointing out the bank’s CEO was also on the Federal Reserve Board.
They also contended it was a 28-year practice, and no one informed the defendants it was illegal.
A turning point in the case came prior to the trial came when a federal judge denied a motion from the defense to dismiss the case. Motions to not admit other types of evidence were denied.
In October, Wilmington Trust, which was acquired by M&T Bank in 2011, reached a $60 million settlement with the U.S. attorney’s office — including $16 million previously paid to the Securities and Exchange Commission in a related action.
M&T, as the successor to Wilmington Trust, still faces a civil suit over the concealment of bad loans. The Buffalo-based bank has been unsuccessful in quashing the suit and has set aside funds in the event of an unfavorable decision in the case.
The continuing mystery in the case and enforcement actions has involved former Wilmington Trust CEO Ted Cecala.
Cecala pushed the bank’s footprint into southeastern Pennsylvania and made other moves, but has been portrayed as focusing on Wilmington Trust’s wealth management business. Those lines of business were retained by M&T and kept the Wilmington Trust name.
Content from WHYY and Delaware Business Now