Bank Officials Plead Guilty To Concealing Loan Delinquencies

By
Education & Training with (retired) TN LIC# 290452

Two Former Will County Bank Officials Plead

Guilty To Concealing Loan Delinquencies of Two

Customers

U.S. Attorney’s Office December 08, 2014
  • Northern District of Illinois (312) 353-5300

CHICAGO—A former officer and a former director of a bank in Will County have pleaded guilty to federal charges for fraudulently creating false reports that made it appear that the bank’s loan portfolio was in better shape than it actually was. The defendants together concealed delinquent loan payments on behalf of two customers whose multiple loans totaled approximately $2.8 million, and together caused the bank to lose more than $1.1 million, according to their guilty pleas that were announced today by federal law enforcement officials.

One defendant,

MARTIN E. SCHMIDT, JR.,

was senior vice president for lending and a member of the board of directors of First Community Bank and Trust, which operates in Beecher and Peotone in Will County. Co-defendant,

DONNA M. BARBER,

was vice president for mortgage lending. First Community Bank and Trust cooperated with the federal investigation.

Schmidt, 57, of Beecher, pleaded guilty on Nov. 13 to making false bank reports and is free on his own recognizance pending sentencing on Feb. 26, 2015. Barber, 53, of Beecher, pleaded guilty to the same charge last Thursday and is free on her own recognizance pending sentencing on March 17, 2015. Both will be sentenced by U.S. District Judge Charles Kocoras in Federal Court in Chicago. They were charged together in a criminal information that was filed in late October.

Making false bank reports carries a maximum penalty of 30 years in prison and a $1 million fine. Schmidt’s plea agreement anticipates an advisory United States Sentencing Guidelines range of 41 to 51 months in prison. Barber’s plea agreement anticipates an advisory guidelines range of 33 to 41 months in prison, with the government recommending a sentencing of approximately 22 months provided she continues to fully cooperate.

In addition, Schmidt and Barber each face a 10-year prohibition on directly or indirectly participating in the affairs of any federally insured credit union or financial institution.

In pleading guilty, Schmidt and Barber admitted that they caused and made false entries in the bank’s past due accounts report for September 2009 by intentionally omitting to disclose as past due nine of Customer K’s loans and advances in the total principal amount of approximately $367,000, and 39 of Customer M’s loans in the total principal amount of approximately $2.5 million.

According to court documents, Schmidt was the point of contact for Customer K, and Barber was the point of contact for Customer M, and their compensation was based, in part, on the performance of the loans for which they were each responsible. By September 2008, Schmidt and Barber each knew that Customers K and M were unable to make payments to the bank on their various loans. They agreed that they needed to take action to prevent the delinquent accounts from appearing on the bank’s reports and began concealing their past due nature. The false entries extended from September 2008 until October 2009.

Barber, with Schmidt’s knowledge and approval, and Schmidt made and caused false entries in loan records allowing Customer M to skip payments without paying the interest due and extending notes without interest payments being current. Some false entries were made on a retroactive basis so the actual condition of the loans would not appear on the bank’s current monthly records.

Schmidt alone caused an unauthorized, undocumented advance of approximately $105,562 to be disbursed to Customer K to make payments on other delinquent loans. He also approved approximately $269,038 in loans to Customer K at a time when he knew that Customer K was unable to repay these loans. Schmidt also caused Barber to make entries in Customer K’s account records that allowed Schmidt to make unauthorized disbursements to Customer K.

Schmidt deceived the bank’s board of directors by leading them to believe that he and Barber were properly managing the bank’s loans, when they were actually fraudulently creating reports that made it appear that the loan portfolio was in better shape than it was.

Schmidt caused the bank to lose more than $1.18 million resulting from both customers’ delinquent loans, which would not have been extended and would have been called in default at an earlier time, as well as by issuing an authorized $80,000 letter of credit and improperly guaranteeing $22,500 in insufficient funds checks for Customer K. Schmidt and Barber were responsible for causing the bank to lose approximately $708,274 relating to Customer M’s loans, while Schmidt alone was responsible for the bank’s loss of approximately $475,100 resulting from Customer K’s loans.

The government is being represented by Assistant U.S. Attorney Brian Netols.

The guilty pleas were announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

This content has been reproduced from its original source.
 
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