Closing Arguments Set in Wilmington Trust Fraud Trial - WBOC-TV 16, Delmarvas News Leader, FOX 21 -

Updated: Closing Arguments Begin in Wilmington Trust Fraud Trial

Posted: Apr 23, 2018 8:26 AM Updated:

WILMINGTON, Del. (AP)- Four former Wilmington Trust Corporation executives knew they were misleading banking regulators and investors by concealing the truth about the bank's imploding commercial real estate loan portfolio in the wake of the 2008 financial crisis, a prosecutor told jurors Monday in the defendants' federal fraud and conspiracy trial.

"The defendants knew that what they were doing was wrong," Assistant U.S. Attorney Robert Kravetz told jurors as closing arguments got under way.

While jurors have been bombarded with testimony about arcane banking rules and terms over the past six weeks, Kravetz told them the trial was about something much simpler - "the defendants' failure to tell the truth."

Prosecutors allege that the former executives concealed the truth about the bank's massive amount of past due commercial real estate loans before the century-old institution was hastily sold in 2011 as it bordered on collapse. The bank, founded by members of the DuPont family, imploded despite receiving $330 million from the federal government's Troubled Asset Relief Program. Before the fire sale to M&T Bank, Wilmington Trust also raised $287 million in a 2010 stock offering while concealing the truth about its shaky financial condition to investors, prosecutors claim.

The bank itself - the only financial institution to be criminally charged in connection with the federal bank bailout program - also was named as a defendant in the case but reached a $60 million settlement with prosecutors last year just as a trial was to start.

Former bank president Robert V.A. Harra Jr., along with former chief financial officer David Gibson, former chief credit officer William North, and former controller Kevyn Rakowski, are charged with fraud, conspiracy and making false statements to federal regulators.

Defense attorneys argue that their clients did nothing wrong. They asked Judge Richard Andrews to acquit them last week after prosecutors finished presenting their evidence.

Andrews denied the acquittal motions but told jurors in his instructions Monday that if they find that a defendant acted in "good faith," rather than knowingly, willfully or with the intent to defraud, they should find the defendant not guilty.

Andrews also told jurors that noncompliance with a banking regulation or generally accepted accounting principles does not necessarily equate to a violation of criminal law.

"Acting in good faith is a complete defense," he said.

Defense attorneys were to begin presenting arguments Monday afternoon, starting with Harra's lawyers.

Prosecutors allege that Wilmington Trust concealed the quantity of past due loans on its books from October 2009 through November 2010. Specifically, authorities say Wilmington Trust 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.

In the fourth quarter of 2009, for example, Wilmington Trust officials reported that only $10.8 million in commercial loans were 90 days or more past due, concealing more than $316 million in past due loans subject to the waiver practice, according to prosecutors.

Kravetz reminded jurors of emails and other documents that show internal concerns about Wilmington Trust's loan portfolio as early as 2007, when North indicated that the number of waived loans was too high and that bank officials needed to get the situation under control to avoid issues with examiners, auditors and executive management.

Prosecutors say that after an October 2009 meeting to discuss matured loans and "how to make them go away" by year's end, bank officials decided on a "mass extension" that involved temporarily extending more than 800 commercial loans worth $1.3 billion.

During that same period, North sent an email to Harra in December 2009 referring to certain loans as "credit turds."

Three other former Wilmington Trust officers, vice president Joseph Terranova, Delaware Market Officer Brian Bailey, and loan officer Peter Hayes have pleaded guilty in the case and are awaiting sentencing. Terranova testified for the prosecution at the trial of their former colleagues.

Two other co-conspirators already have been sentenced. James Ladio, former CEO of MidCoast Community Bank, was sentenced to two years in prison and ordered to pay $700,000 restitution. Businessman Salvatore Leone was sentenced to a year and a day in prison and ordered to pay $784,000.

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