![]() Attorney Melinda Haag said UCB was "one of the largest criminal prosecutions brought by the U.S. Investigation FactĮlectronics stored in a warehouse that served as collateral for a major loan turned out to be fake-staged like a Hollywood movie set. ![]() ![]() Instead of relying on traditional notions of bank fraud, SIGTARP compared UCB's bank information to red flags we developed. The bank later failed - one of the largest failures since the Great Depression - and $300 million in TARP funds were lost. Ally, which paid a $52 million penalty, acknowledged that it failed to inform investors about deficiencies and material changes to its underwriting and diligence process.Īfter aggressive and risky loan-fueled growth, management of TARP recipient United Commercial Bank (UCB) fraudulently inflated the bank's financial performance by hundreds of millions of dollars. Morgan Stanley, which paid a $2.06 billion penalty, admitted that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its RMBS, and about its due diligence practices. Goldman, which paid a $5.06 billion penalty that included homeowner relief, admitted that it made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which it would protect investors in its RMBS from harm. In separate enforcement actions with the Justice Department, each company acknowledged wrongdoing under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), made corporate changes, and paid significant monetary penalties totaling nearly $8 billion.Īlly also discontinued operations of its registered broker-dealer, Ally Securities. Misleading investors about the quality of RMBS was a key type of abuse that contributed to the financial crisis. In the three separate cases, SIGTARP was part of a task force that uncovered the fraud. Goldman Sachs, Morgan Stanley, and Ally Bank misled investors about the quality of residential mortgage-backed securities (RMBS) each company issued, marketed and sold. As part of restitution, the court ordered forfeiture of real estate involved in the crime worth more than $20 million. The real estate developer died prior to the trial. David Lonich, an attorney co-conspirator, was sentenced to six years and three months in prison. The court sentenced both Cutting and Melland to eight years and four months in prison. All $8.6 million in TARP bailout funds were lost when the bank failed. When asked why the bank was taking TARP funds, Cutting said that when the government provides a jar of cookies it only made sense to for the bank to take some. The prosecution was the result of a multi-year investigation by SIGTARP and its law enforcement partners. The illegal loans resulted in massive losses and eventually caused the bank to fail. They then tried to cover up the scheme by falsifying the bank's books and lying to the bank's regulators. The bankers recommended the loans to "straw" borrowers, knowing the proceeds would actually go to a single real estate developer. Leading up to and during the financial crisis, former chief executive officer Sean Clark Cutting and former chief loan officer Brian Scott Melland conspired to make millions in excessive and illegal loans. All bankers were also banned from banking. James Ladio, former chief executive officer of MidCoast Community Bank and a co-conspirator in the case, was sentenced to two years. In separate but related parts of the case three other Wilmington Trust bankers and a co-conspirator were convicted and sentenced to terms up to two and half years. Wilmington Trust agreed to pay $60 million to resolve a criminal indictment with the Department of Justice and civil charges by the Securities and Exchange Commission. Wilmington Trust announced an agreement to be acquired by M&T Bank at a discount of approximately 46% from the bank's share price the prior trading day. ![]() Using false security filings, Wilmington Trust raised more than $273 million in a stock sale. SIGTARP played a lead law enforcement role in uncovering criminal and civil violations of the law through data analytics, witness interviews, evidence gathering, and banking expertise. $330 Million TARP recipient Wilmington Trust made the bank appear heathier than it actually was to the Federal Reserve, the Securities and Exchange Commission and the investing public. ![]()
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