Bank Execs and Borrower Sentenced for Loan Fraud

Allison Tussey —  October 27, 2011 — Leave a comment

Thomas Hebble, former Executive Vice President of Orion Bank, was sentenced to two and one half years in federal prison, Angel Guerzon, former Senior Vice President of Orion Bank, received two years in federal prison, and Francesco Mileto, a former Orion Bank borrower, was sentenced to five and one half years in federal prison.  The defendants were sentenced by U.S. District Judge Charlene E. Honeywell for their participation in a conspiracy to mislead State and Federal regulators that Orion Bank was in a better capital position than it was in truth and fact.

As part of their sentence, the Court also entered a money judgment in the amount of $2,000,000.00, part of the proceeds of Mileto‘s charged criminal conduct. Orion Bank, a failed financial institution, was closed by the Florida Office of Financial Regulation on November 13, 2009.

Thomas Hebble, Angel Guerzon, and Francesco Mileto pled guilty on May 2, 2011. According to court documents, the conspiracy to which the defendants were sentenced had two objectives: 1) to finance the sale of promissory notes secured by mortgages held by Orion Bank on distressed properties, thereby creating the illusion that non-performing loans were performing loans, and 2) to conceal the financing for the sale of Orion Bancorp, Inc. stock to a borrower in order to create the illusion of a legitimate capital infusion into the bank. The defendants accomplished these objectives by falsifying the books and records of Orion Bank and deceiving State and Federal regulators over a period of seven months, from May 2009 until November 13, 2009.

As part of the scheme to defraud, the defendants increased loans-in-process to nominee entities associated with Mileto to $82 million, including a $26.5 million line of credit. Within the lines of credit, the bank concealed $15 million of financing for Mileto‘s purchase of Orion Bancorp, Inc. stock, despite knowing that banking laws and regulations prohibited the bank from financing the purchase of its, or its affiliates’ own stock. Top bank executives closed on the loans after discovering that Mileto had submitted fraudulent financial documentation to Orion Bank in support of the current loans, and in support of $41 million of previously acquired loans, in order to ensure the capital infusion to the bank.

Defendant Hebble was also sentenced for his participation in a second round-trip stock transaction which occurred in June and July 2009. As part of the scheme, Hebble and others increased the amounts of loans-in-process to an Orion Bank depositor to $18 million, in order to provide and conceal $7 million of financing for the purchase of Orion Bancorp, Inc. stock, despite knowing that banking laws and regulations prohibited the bank from financing the purchase of its, or its affiliates’ own stock.

The Florida Office of Financial Regulation closed Orion Bank on November 13, 2009, and appointed the Federal Deposit Insurance Corporation (“FDIC”) as the receiver. The FDIC requested $33,512,618.00 in restitution for Hebble and Guerzon‘s participation in the scheme and a restitution hearing will be held to apportion liability among the defendants. The Court ordered Mileto to pay restitution to the FDIC in the amount of $65,214,491.00.

U.S. Attorney Robert E. O’Neill announced the sentences.

This case was investigated by the Federal Bureau of Investigation, Federal Deposit Insurance Corporation – Office of Inspector General, Federal Reserve Board – Office of Inspector General, Internal Revenue Service – Criminal Investigation, and Special Inspector General for the Troubled Asset Relief Program. It was prosecuted by Assistant United States Attorney Nicole H. Waid.

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Allison Tussey

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