Banker Sentenced for Lying to Regulators About Loans

Allison Tussey —  February 20, 2013 — Leave a comment

James A. Regas, 82, Oak Brook, Illinois, the former chairman of a west suburban bank was sentenced to a year and a day in federal prison for making false statements in regulatory documents regarding his undisclosed personal interest in loans that resulted in the bank losing more than $680,000. The defendant, who was chairman of the board of directors of the former Western Springs National Bank & Trust, pleaded guilty last July, 2012, admitting that he falsified and concealed material facts that should have been fully disclosed to the bank’s directors and government regulators during 2008 and 2009. The bank’s two branches were closed by federal regulators in April 2011, and its assets were purchased by Heartland Bank and Trust Company.

Regas has paid $681,617 in restitution, and he was fined $60,000 by U.S. District Judge Gary Feinerman, who cited Regas’ “sustained course of conduct” in imposing the sentence in federal court in Chicago. Regas was ordered to begin serving his sentence in 90 days.

In pleading guilty, Regas admitted causing a bank employee to file a false quarterly Report of Condition and Income, also known as a “Call Report,” with the Federal Deposit Insurance Corp., and he signed the report knowing they contained false information regarding the delinquency status of certain loans.

Regas admitted that between 2004 and 2009, he referred business associates to Western Springs for loans, without disclosing to the bank that he had financial partnerships with those individuals and that he intended to benefit personally from the loans. Regas knowingly submitted false conflict-of-interest statements to the bank in which he denied having any financial relationship with any of the bank’s borrowers.

Among the loans from which Regas benefitted, directly or indirectly, without the knowledge and approval of disinterested bank directors, were an $803,000 loan to North Park Webster LLC in December 2004, which was used partially to finance the purchase of three properties in Evanston, Illinois, in which Regas and family members had financial interests; a $500,000 loan to one of Regas’ associates in November 2005, from which Regas received approximately half of the proceeds indirectly through a third-party; and a $750,000 loan to a real estate investor in September 2008 to finance the investor’s purchase of an apartment building in Evanston from Regas. That building served as collateral for the bank on another loan that Regas acquired and sold through a nominee company.

These loans enabled Regas to use bank funds for his own benefit without having to apply for loans himself, posting collateral, or signing any promises to repay the bank’s money, while evading federal restrictions on insider loans. Because the loans were not fully repaid, Western Springs suffered a loss of approximately $681,617, which Regas paid as restitution.

The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation.

“At a time when the public’s confidence in the banking system has plummeted, Regas concealed material information from the board of directors, placed his personal interests above those of the bank, and caused false statements to be made to regulators charged with ensuring that all national banks are operating in a safe and sound manner,” the government argued in urging a custodial sentence.

The government was represented by Assistant U.S. Attorneys Brian Havey and Andrianna Kastanek.

The prosecution falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit stopfraud.gov

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