Ex-wilmington Trust officials convicted of fraud

WILMINGTON, Del. — Four former executives for the only financial institution to be criminally charged in connection with the federal bank bailout program were convicted Thursday of fraud and conspiracy charges.

The former Wilmington Trust executives were convicted after a sixweek trial in which prosecutors said the defendants deliberately misled banking regulators and investors by not reporting hundreds of millions of past-due loans.

Former bank President Robert Harra Jr., former Chief Credit Officer William North, former Chief Financial Officer David Gibson and former Controller Kevyn Rakowski were convicted on charges of fraud, conspiracy and making false statements to federal regulators.

Several of the offenses carry maximum prison terms of 30 years, but it’s unclear whether any of the four will spend time behind bars. No sentencing date has been set, and defense attorneys vowed to appeal.

“This isn’t over yet,” said Ken Breen, an attorney for Gibson.

The bank itself reached a $60 million settlement with prosecutors last year just as a trial was set to start. In reaching the settlement, Wilmington Trust did not acknowledge any liability.

Prosecutors alleged that in the wake of the 2008 financial crisis, bank executives misled regulators and investors about Wilmington Trust’s massive amount of past-due commercial real estate loans before the bank was hastily sold in 2011 while bordering on collapse. Founded by members of the du Pont family in 1903, the bank imploded despite receiving $330 million from the federal government’s Troubled Asset Relief Program.

“It was the gold standard for many number of years in the state of Delaware, and its demise was a significant development in this community,” U.S. Attorney David Weiss said.

“The defendants were a victim of their own arrogance,” Weiss added.

Weiss said the defendants recklessly loaned money to a small group of developers, mostly for projects in central and southern Delaware, then hid the truth when the loans became past due and weren’t paid.

Instead of reporting the true amount of past-due loans, bank officials “waived” millions of dollars in matured loans from reporting requirements if the loans were designated as “current for interest” and in the process of being extended, even if the necessary paperwork had not been done.

Then the bank lent even more money to struggling developers just so they could make the interest payments on the underlying loans.