U.S. Attorney for Delaware David Weiss stated that two former Wilmington Trust executives. Robert Harra, former president of Wilmington Trust and David Gibson, chief financial officer, deserved prison time.
Both received six-year sentences, with further appeals expected. (See link to Associated Press story from WHYY).
“The downfall of Wilmington Trust is a tragedy. It’s a tragedy to the over 700 employees who lost their jobs as a result of the bank’s fire-sale acquisition by M&T. It’s a tragedy to those former employees who built the Bank into something to be proud of over the last century. It’s a tragedy to this community, which lost what was thought to be a stable employer and a gold-standard financial institution. And it didn’t have to be,” Weiss stated.
Weiss continued, “WTC’s2009 filings with the SEC and the Federal Reserve were false. The bank’s certified submissions grossly understated the quantity of past due loans on WTC’s books, and thereby misled regulators and the public about the financial health of WTC’s portfolio. In particular, the 2009 year-end filings failed to disclose that the bank had waived $300 million in loans more than 90 days past due, and had mass extended another $800 million in commercial loans without the proper due diligence. At the same time, the bank went to the market and asked investors for $287 million in additional capital.”
Weiss offered the following observations on Harra and Gibson:
“Robert Harra, as WTC’s President and Chief Operations Officer, established an aggressive sales culture that ignored sound risk assessment in commercial real estate lending. As the economy turned, these practices came home to roost. But rather than acknowledge the inability of these borrowers to repay their loans, Harra embraced the waiver practice as a means of concealing the trouble faced by the bank.”
“David Gibson, as the bank’s Chief Financial Officer, was the ultimate decision-maker on financial reporting. He knew about the true condition of the commercial loan portfolio – the hundreds of millions of dollars in past due loans that were not included in the 2009 filings with the SECand Federal Reserve. Nonetheless, he certified the bank’s financials as accurate and overstated the health of the loan portfolio, while marketing the stock offering to the investing public.”
Weiss acknowledged the support Gibson and Harra received in requests for leniency.
“These actions do not define defendants’ lives. As you’ve heard, they were successful and productive both professionally and personally. They are supported by their family, friends and members of our community whose lives they impacted in positive ways. But, they did violate the law. They committed serious federal crimes and failed in their responsibilities to the bank, its employees and shareholders. Justice demands accountability.”
Weiss concluded with the following: “Ultimately, this case, like many other prosecutions is about the human cost of defendants’ actions — the 700 WTC employees who lost their jobs, the shareholders who lost their investments, and in some instances their life savings, the defendants’ families, and a community that lost a bank that had been a proud and successful institution for decades.”