Appeals court panel assesses Wilmington Trust convictions
“Rather, the instructions specifically tie the past due status to the loan agreement and payment, or lack of payment, of interest or principal,” Kravetz said, citing a ruling by US District Judge Richard Andrews.
A three-judge panel from the Third Circuit court took the case under advisement after hearing arguments for more than two hours. The panel initially allocated lawyers only 20 minutes for each party.
“We recognize that this is an important case,” said Judge Cheryl Ann Krause.
North, former Wilmington Trust bank chairman Robert Harra Jr., former CFO David Gibson and former Controller Kevyn Rakowski were convicted in May 2018 of fraud, conspiracy and misrepresenting federal regulators.
Harra and Gibson were sentenced to six years in prison. North was sentenced to 4.5 years and Rakowski to three years. All four remained on bail pending their appeals.
The bank itself reached a $ 60 million settlement with prosecutors, without acknowledging any liability, just as a trial was due to begin.
Prosecutors alleged that following the 2008 financial crisis, bank executives misled regulators and investors about Wilmington Trust’s massive amount of delinquent commercial real estate loans before the bank was sold in a hurry in 2011 as it bordered on collapse. Founded by members of the DuPont family in 1903, the bank imploded despite receiving $ 330 million from the federal government’s distressed asset assistance program.
After the trial, Andrews dismissed the defense motions for acquittal judgments or a new trial. He rejected defense arguments that instructions for filing reports with the Federal Reserve, including quarterly financial documents called appeal reports, and for disclosing financial information in documents filed with the Securities Exchange Commission, were ambiguous. He also found that there was sufficient evidence for a rational jury to conclude that the defendants acted with the requisite criminal intent.
“The defendants knew they were dishonest,” he wrote.
Prosecutors argued that instead of reporting the actual amount of delinquent loans, bank officials “waived” millions of dollars in overdue loans from reporting requirements if the loans were designated as “current against interest.” And being extended – even if the necessary paperwork had not been completed. To ensure that loans well beyond their repayment dates were up to date for interest and therefore allegedly exempt from reporting requirements, the bank loaned distressing developers even more money just so they could make interest payments on the underlying loans.
In Q4 2009, Wilmington Trust officials reported just $ 10.8 million in commercial loans 90 days or more past due, concealing more than $ 316 million in delinquent loans subject to the practice of forgiveness. , according to prosecutors.
Defense lawyers argued that the practice of waiver had been in place for decades and was no secret.