Former Wilmington Trust execs win appeal of fraud and conspiracy convictions
A federal appeals court overturns the convictions of former Wilmington Trust executives found guilty of bank fraud and conspiracy.
The Third Circuit Court of Appeals ruling Tuesday vacated the 2018 fraud and conspiracy convictions of former bank President Robert Harra, former CFO David Gibson, former Chief Credit Office William North, former and former Controller Kevyn Rakowski. It also reversed their convictions on several counts of making false claims.
The bank officials were found guilty of conspiracy to commit fraud and each sentenced to several years in prison in one of the only criminal cases connected to the 2008 financial crisis and misuse of federal bailout money. Wilmington Trust received $330 million from the federal TARP program.
A U S. District Court jury agreed with prosecutors that the defendants hid hundreds of millions of dollars of past-due loans in reports to the Securities and Exchange Commission and the Federal Reserve in 2009 and 2010.
The “toxic” loans led to Wilmington Trust being sold off to M&T Bank in 2011.
But the Appeals Court embraced defendants’ objections over how past due loans were defined in the case, and the bar prosecutors needed to clear for a jury to find the defendants’ statements false.
"In a matter of first impression, the Court held that the government was required to establish that the defendants’ statements were false under any “objectively reasonable” interpretation of the applicable reporting instructions – even in a circumstance where a defendant never believed in that interpretation and intended to lie to the regulators all along Needless to say, I am disappointed with this result," said U.S. Attorney for the Delaware District David Weiss in a statement
Harra's attorney Michael Kelly says he and his client are happy and relieved by the ruling.
"I never understood why this case was brought," said Kelly said in a statement. "In my view, this case was an incredible waste of taxpayer dollars that literally ruined the lives of 4 innocent people. Rob and his family have endured nothing less than a nightmare for almost 10 years now. Rob Harra is the most decent human being I have ever met. He never dreamt of breaking the law."
The ruling does not mean the case is over. The Third Circuit’s ruling could be appealed to U.S. Supreme Court or the defendants could face a new trial in District Court.
"We are currently analyzing the Court’s opinion and evaluating our options, including, as the Court of Appeals authorized, retrying the defendants for conspiracy and securities fraud," said Weiss in his statement.
Harra and Gibson were each sentenced to 6 years in prison and ordered to pay a fine of $300,000 in December 2018. North was sentenced to four and a half years, and Rakowski three years. All four were allowed to remain out of prison pending their appeal.