Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

Randy Jones, a former executive vice president with Community Bank & Trust who worked for the bank for 30 years, pled guilty last week in the U.S. District Court for the Northern District of Georgia for an alleged multi-million dollar fraud scheme, according to an article in the Atlanta Journal-Constitution. Specifically, Jones was alleged to have made loans to a customer, Joseph Penick, Jr., to purchase tracts of land in North Georgia. Penick is alleged to have paid Jones $770,000. Penick has pled guilty to his involvement in the scheme.

Jones was also alleged to have used family members and friends to obtain more than $800,000 in loans from Community Bank & Trust to purchase an interest in six Zaxby's restaurants.

Community Bank & Trust was shut down by regulators in January of 2010. The bank opened in 1900 and had been insured by the Federal Deposit Insurance Corporation since 1934. Before it failed, it had 36 branches across the region and $1.1 billion in assets. An FDIC report in September of 2010 found that Community Bank & Trust failed to follow its own loan policy and had made more than $10 million in bad loans. Georgia has had more failed banks than any other state--52 since 2008. 

Investigators say he used the names of family members without their consent to obtain more than $800,000 in loans from the bank, which he used to buy a stake in six Zaxby's restaurants. And they claim he approved more than $2.8 million in loans to fraudulent borrowers so that a customer who was a real estate developer could pay down interest on loans.

The bank failures have also led to a number of prosecutions and suits against former bank executives, employees and others. Five people with ties to Omni National Bank of Atlanta were convicted on bank fraud and other charges after the bank collapsed during a federal mortgage fraud probe. A lawsuit by the FDIC also alleges that former officers of Alpharetta-based Integrity Bank engaged in gross negligence and breach of fiduciary duty relating to making bad loans. One of the defendants is State Senator Jack Murphy, a former bank official and the new Chairman of the Senate Banking Committee. Sen. Murphy has denied any wrongdoing.

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Georgia leads the nation in bank failures this decade, with 32 failed banks since 2002, 25 of those in 2009 alone, according to the Federal Deposit Insurance Corporation (FDIC). Fraud has undoubtedly played a substantial role in the failure of many of these banks, and the FDIC and other agencies are especially vigilant in detecting and prosecuting fraud in the wake of bank failures.

Brent Merriel of Atlanta, Georgia, was indicted last week in the U.S. District Court for the Northern District of Georgia on four counts of aggravated identity theft and two counts of making false statements to the FDIC as announced by the U.S. Attorney's Office for the Northern District of Georgia. Merriel is alleged to have obtained several million worth of loans on properties in his name and the names of family and friends from Omni National Bank (Omni). Omni failed on March 27, 2009, and was taken over by the FDIC. Merriel then asked the FDIC to forgive $2.2 million in loans and to allow him to make a "short sale" of two properties to purchasers. A short sale is a sale of a property for less than the full amount due or owed, which serves to reduce a lender's losses or assist the property owner. However, in Merriel's case, the alleged purchasers were allegedly persons whose identities had been stolen. Merriel is also alleged to have forged sales contracts and loan commitment letters which he submitted to the FDIC.

The release notes that other individuals have been prosecuted relating to Omni, including Mark Anthony McBride, who fraudulently obtained millions in mortgage loans from Omni and other lenders and who pled guilty last April, and Delroy Oliver Davy, who similarly obtained millions in fraudulent loans from Omni and others. It quotes FDIC Office of Inspector General, Southeast Region Special Agent In Charge C. Ed Slagle as stating that FDIC will aggressively investigate and prosecute fraudulent acts uncovered in the FDIC's process of liquidating assets of failed banks in order maximize recoveries. The release also quotes Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofski, Department of Housing and Urban Development Inspector General Kenneth M. Donohue and U.S. Postal Inspector in Charge, Atlanta Division Martin D. Phanco on fraud and enforcement.

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