A group of former top executives at Wilmington Trust has been found guilty in a federal fraud trial.
The jury agreed with prosecutors that Robert Harra, David Gibson, William North and Kevyn Rakowski hid hundreds of millions of dollars of past-due loans in reports made to the Securities and Exchange Commission and the Federal Reserve in 2009 and 2010. Those “toxic” loans led to Wilmington Trust’s demise in 2011.
The four execs were convicted on 15 separate counts, including conspiracy to defraud the United States and making false banking record entries.
Gibson was also found guilty on three additional counts involving false financial report certifications.
David Weiss, U.S. Attorney for the Delaware District, called the executives "victims of their own arrogance."
"The jury rightfully concluded that these defendants had an absolute obligation to disclose. They had an obligation to disclose the condition of the loan portfolio and the amount of mature, past due loans to the Federal Reserve, the SEC and to the public generally. It was not up to them. The public has a absolute right to know how these financial institutions are keeping score," said Weiss.
FBI Supervisory Special Agent Joseph Gordon says the outcome shows corporate executives face to the same standard of law as anyone else.
"When executives false and misleading statements to conceal the truth, they must be held accountable in order to protect and preserve the integrity of our financial system," said Gordon.
Sentencing will be no sooner than four months from now. It’s uncertain how much jail time the executives face, though prosecutors note some individual counts come with maximum sentence of 30 years.
The case is the only one where bankers who received federal bailout money in the wake of the 2008 financial crisis faced criminal sanctions. Wilmington Trust received 330 million dollars from the federal TARP program.
M&T Bank bought Wilmington Trust at a steep discount in 2010 after the sour real estate loans left the company in dire financial straits, and assumed Wilmington Trust's assets and liabilities as part of that deal.
Wilmington Trust was initially named as a defendant in the case, but reached a multi-million dollar settlement with federal prosecutors last fall.