Poppi Metaxas, former president and CEO of Gateway Bank of Oakland, California, was charged with bank fraud, bank fraud conspiracy, and perjury in relation to a sham "round trip" transaction.
The scheme, initiated by Metaxas, caused Gateway to execute a false transaction in which the bank self-funded a down payment to make it appear that Gateway had sold toxic, non-performing mortgage loans.
The announcement was released by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). The defendant surrendered to federal agents in California on Wednesday, and was arraigned at the federal courthouse in San Francisco.
The indictment alleges that in February and March 2009, Metaxas attempted to defraud Gateway in connection with Gateway’s sale of non-performing mortgage loans (NPLs) to three entities in exchange for $15 million.
Allegedly, Metaxas used Gateway Bank to loan money to Ideal Mortgage Bankers LTD. doing business as Lend America, a mortgage lender and Gateway’s largest mortgage lending client. Lend America then provided money to three entities who planned to purchase the NPLs.
Through a series of wire transfers, Metaxas and others used the proceeds of the sham loan to Lend America to satisfy the 25 percent down payment the three entities owed to Gateway in connection with the sales of the mortgage loans. The intent was to deceive observers and regulators into believing Gateway had removed the toxic assets from its books.
"To conceal the fraudulent 'round trip' of the loan funds, in October 2009, Metaxas provided false testimony to the Office of Thrift Supervision when she was asked about the source of the down payment,"
the report found.
“Metaxas, former president and CEO of Gateway Bank, is charged with cooking the bank's books that were used to review the bank's TARP application by using a 'round trip' transaction to hide the fact that the bank's financial condition was in shambles," said Christy Romero, Special Inspector General for TARP.
Romero added, "While Gateway's TARP application was pending, its regulators demanded that the bank raise capital and reduce its problem assets. Metaxas allegedly orchestrated a fraudulent scheme to give the appearance that the bank was shoring up its finances by selling problem loans to outside investors."
The release noted that charges in the indictment are allegations, and the defendant is presumed innocent until proven guilty.