U.S. District Court Judge Richard G. Andrews sentenced former Wilmington Trust Chief Credit Officer William North, 59, to four and half years in prison and a $100,000.00 fine. Andrews also sentenced former Wilmington Trust Controller Kevyn Rakowski, 65, to three years in prison.
The sentencings of North and Rakowski followed those of Robert Harra, 69, the bank’s former president; and David Gibson, the bank’s former chief financial officer, 61.On Monday, Andrews sentenced both Harra and Gibson to six years in prison and a fine of $300,000. The court also ordered all four Defendants to agree to a ban from the banking industry and to surrender to the custody of the Bureau of Prisons by February 19, 2019.
A federal jury convicted the four in May, following a two-month trial. The jury returned guilty verdicts on 16 counts including conspiracy, as well as fifteen fraud, false statements, and false entries offenses. The jury also convicted Gibson on three additional counts of making false certifications in financial reports.
The mystery that remains after the sentencings involves the status of former Wilmington Trust CEO Ted Cecala. Cecala has not faced any charges in the case.
According to a release, the government proved that the defendants conspired to falsely report the bank’s amount of past due loans to regulators, investors, and the public. The government presented evidence that the Defendants caused the Bank to underreport approximately $300 million in past due loans in the third and fourth Quarters of 2009 in call reports and monthly reports filed with the Federal Reserve and in Securities Filings with the Securities Exchange Commission. The bank used the false Securities Filings to raise $287 million in a February 2010 stock sale, the release stated.
When the bank finally reported its past due loan information correctly in the Third Quarter of 2010, it recognized losses of over $370 million and its share price dropped. On November 1, 2010, M&T Bank announced that it had acquired Wilmington Trust for $300 million, a sharply-discounted price.
The U.S. Attorney’s office noted that the Wall Street Journal referred to the acquisition as “one of the biggest banking fire sales in history.” Over 700 Wilmington Trust employees lost their jobs as a result of the merger.
U.S. Attorney David C. Weiss stated, “Today’s sentencing hearings are the culmination of the multi-year investigation and trial of four of the top officers of the Wilmington Trust Corporation. This landmark prosecution of the Bank’s President, Chief Financial Officer, Chief Credit Officer, and Controller sends a clear message that top corporate bankers cannot lie to their regulators and the public about important disclosures that affect the safety and soundness of banks and impact the decision of investors to buy or sell stock. The defendants’ actions contributed to the downfall of an important Delaware institution, causing hundreds of employees to lose their jobs and investors to lose hundreds of millions of dollars when the bank’s stock price collapsed. The sentences imposed by the Court appropriately punish the Defendants for their serious criminal conduct and strongly encourage other corporate executives to follow the law. I am grateful to the prosecution team and our investigative partners for their steadfast commitment to this case and their unyielding efforts in bringing the Defendants to justice.”
“TARP was created to stabilize banks, not to fund banks to engage in risky lending and then commit fraud to cover up bad loans,” said Special Inspector General for the Troubled Asset Relief Program Christy Goldsmith Romero. “Once again, SIGTARP’s investigation has revealed bank executives— like Wilmington Trust’s former President, former chief financial officer, former chief credit officer, and former controller sentenced to prison—who criminally concealed hundreds of millions in past due loans resulting from risky aggressive growth in the years leading up to the financial crisis. Once again, courts are bringing justice through prison sentences for these crimes”
This case was prosecuted by Assistant U.S. Attorneys Robert F. Kravetz, Lesley F. Wolf, and Jamie M. McCall.