DOVER, Del. (AP) — The former president of Wilmington Trust and three other former bank executives were indicted Wednesday on fraud and conspiracy charges in an ongoing federal investigation into the collapse of the century-old financial institution.
An indictment issued by a federal grand jury charges Robert V.A. Harra Jr. with conspiracy, securities fraud, making false statements to federal regulators and making false entries in banking records.
Harra, 66, is the highest-ranking former Wilmington Trust official to date to be charged in the investigation, which already has led to several guilty pleas.
Also indicted Wednesday was former Wilmington Trust chief financial officer David Gibson, 58.
In the new indictment, which supersedes an earlier one, prosecutors revised and expanded charges against William B. North, 55, the bank’s former chief credit officer, and Kevyn Rakowski, 61, who served as controller. Both previously pleaded not guilty after being indicted in May, and their attorneys indicated that they would enter similar pleas again.
Authorities allege that the former bank executives concealed information about Wilmington Trust’s deteriorating commercial real estate loan portfolio, which led to its downfall and hasty acquisition by M&T Bank Corp. in 2011.
“The failure by these individuals to properly inform regulators and investors about the true financial condition of Wilmington Trust resulted in significant harm to those investors and losses to the Delaware community,” said U.S. Attorney Charles Oberly III. “As high-ranking bank executives, these individuals had an obligation to accurately report important financial metrics which enable investors to make informed decisions. Even in the wake of the financial crisis, their deception was neither permissible nor excusable.”
Harra’s attorney, Andrew Lawler, said his client will “vigorously fight” the unproven allegations and has no doubt he will prevail.
“He and his attorneys have yet to see any evidence that he violated any law or regulation, or that he ever intended to do so,” Lawler said.
Gibson’s attorney, Kenneth Breen, said the allegations are untrue.
“Dave Gibson did nothing wrong here, and he looks forward to his day in court,” Breen said in an email.
North’s attorney, David Wilks, said his client maintains his innocence, and that there is no rule or law saying the way the bank accounted for past due loans for many years was unlawful or misleading.
Wilks filed a motion last month to dismiss the previous indictment against North, which he described as the first of its kind in American history. The government had never before charged a bank employee for not reporting, as past due, loans that were in the process of being extended and for which interest was current, Wilks argued.
“The indictment contains no reference to any statute, regulation or standard that remotely suggests that such a reporting convention is unlawful and, indeed, none exists,” he wrote.
Authorities allege, however, that the bank failed to disclose to regulators its practice of “waiving” matured loans designated as current for interest and in the process of being extended from the reporting requirements for past due loans. The indictment also cites several emails, dating as far back 2007, in which North expressed concerns about the amount of loans being waived from the reporting requirements.
“If we’ve done our underwriting and documents are out to be executed that’s not a big problem, but the old ‘we’re working on it’ just doesn’t hack it,” North allegedly wrote in December 2007.
As commercial real estate borrowers began experiencing financial difficulties during the economic downturn in 2008, Wilmington Trust officials began providing hundreds of millions of dollars in supplemental financing, prosecutors allege. The supplemental financing allowed borrowers, and in some instances the bank itself, to make monthly interest payments on matured loans when borrowers otherwise may not have been able or willing to make such payments, prosecutors said.
According to the indictment, Wilmington Trust officials reported only $10.8 million in commercial loans that were 90 days or more past due at the end of 2009, concealing more than $333 million in past due loans subject to the waiver practice.