The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) announced that James Crews and Michael Hilbert pleaded guilty to defrauding Excel Bank. After the bank failed in 2012, it received $4 million in federal taxpayer support through the Troubled Asset Relief Program (TARP).
According to plea agreements, Crews and Hilbert admitted to making false statements to Excel Bank with respect to escrow funds or "fix funds" set aside to repair rental homes financed through the bank.
Relying on Crews and Hilbert’s statements that work had supposedly been done on the properties, the bank disbursed the funds, which Crews and Hilbert used for other purposes. After the funds were disbursed in 2010, the loans went into default.
"In the midst of the financial crisis, Crews and Hilbert defrauded TARP recipient Excel Bank for their own personal gain," said Christy Romero, Special Inspector General for TARP.
"Crews and Hilbert submitted fake construction draws in order to get money from a loan they held at Excel Bank. While the loan proceeds were supposed to fund the renovation of various real estate investments, Crews and Hilbert used the money for other purposes, and shortly thereafter, they defaulted on the loan," Romero said.
In total, nearly $5 million dollars was lost, according to Romero. In addition to the $4 million TARP investment lost from the bank’s failure, an additional $900,000 was lost in missed dividend and interest payments owed by the bank.
Bank fraud carries a maximum penalty of 30 years in prison and/or fines of up to $1 million. Sentencing for the two is scheduled for July 10, 2014.