Ex-Wilmington Trust President and CFO to 6 years in prison for fraud and conspiracy
The former president and chief financial officer of the only financial institution criminally charged in connection with the federal bank rescue program was sentenced to six years in prison on Monday for covering up the tense state of the bank in the wake of the 2008 financial crisis.
Former president of the Wilmington Trust, Robert Harra Jr., and David Gibson, the bank’s former chief financial officer, were also fined $ 300,000. Harra, who refused to speak in court prior to his conviction, showed no visible reaction afterwards, other than heaving a heavy sigh through puffed cheeks as he huddled with his lawyers.
Prosecutors said Harra and Gibson – along with former chief credit officer William North and controller Kevyn Rakowski – hid millions of bad loans from the Federal Reserve, the Securities and Exchange Commission, and the public between October 2009 and November 2010.
They say they planned to hide the true volume of hundreds of millions of dollars in losses in order to raise more money from investors.
Supervisors and the public have a right to know the true financial condition of banks, said US Attorney General David Weiss.
“It is about the human cost of the actions of the defendants. The 700 Wilmington Trust employees who have lost their jobs, shareholders who have lost their investments and, in some cases, their savings, ”he said. “The families of the defendants and the community who have lost a bank that has been proud and successful for decades.”
North and Rakowski will be sentenced on Wednesday.
Harra’s attorneys vowed to appeal both his conviction and judgment, claiming he was an “innocent, honorable man.”
“The government has taken advantage of the anger of people who have lost money. … I think the jury was looking for a scapegoat, “said defense attorney Michael Kelly on Monday.
Prosecutors called for eight years ‘imprisonment, while Harra’s attorneys requested a suspended sentence, citing a long history of charitable and community service that has earned him several honors, including the Boy Scouts’ 2006 Citizen of the Year award.
“Justice would be done if your honor gave Mr. Harra a suspended sentence so that he could continue his legendary community service,” Kelly told District Court Judge Richard Andrews.
“His reputation is ruined. His reputation is everything to him, “added Kelly. “Honor is everything to him, and this judgment has caused him much grief.”
Prominent figures sent letters to the court attesting to Harra’s character and begging for indulgence for him, including former Democratic Governor Jack Markell, former Republican Governor and Congressman Mike Castle, a retired Delaware Chief Justice, and the former owner of the Philadelphia Phillies, Ruly Carpenter III.
Prosecutors argued that Harra deserved jail time, saying he lied about the basic metric used by regulators and investors to assess the health of a financial institution and that his behavior embodied “unbridled hubris.”
“When the lies were finally exposed, it was too late to do anything about it,” Prosecutor Robert Kravetz told the judge.
Prosecutors said the defendants misled regulators and investors about the enormous amount of overdue commercial real estate loans owned by the Wilmington Trust before the bank was hastily sold while it was on the verge of collapse. For example, in the fourth quarter of 2009, Wilmington Trust officials reported only $ 10.8 million in commercial loans that were 90 days or more overdue and hid more than $ 316 million in overdue loans subject to an internal “waiver” – Subject to practice.
“However, the defendant Harra did not disclose the waiver practice once,” noted the prosecutors in their judgment memorandum, citing testimony from witnesses. “Instead, Defendant Harra told the chief auditor in a meeting, ‘Tell your boys in Washington that they are damn lucky we’re here in Delaware because we’re fine.”
The centuries-old bank, founded by members of the du Pont family, imploded despite receiving $ 330 million from the federal Troubled Asset Relief Program. Prior to its 2011 distress sale to M&T Bank, Wilmington Trust raised $ 287 million in a 2010 share offering intended in part to repay the TARP funds while hiding the truth about its shaky financial position from investors, prosecutors said.
Wilmington Trust Corp., also charged in the case, reached a $ 60 million settlement with prosecutors on the eve of a scheduled trial last year. The agreement included a civil forfeiture of $ 44 million and $ 16 million previously paid by the Wilmington Trust to the Securities and Exchange Commission in related litigation.
In a separate civil lawsuit last month, a federal judge approved a settlement in which the Wilmington Trust agreed to pay $ 200 million in cash to settle a shareholder lawsuit alleging the bank fraudulently held billions of dollars in bad loans concealed. The accounting firm KPMG has agreed to pay an additional $ 10 million as part of the settlement.
WHY? Zoë reading contributed to this story.