The Office of the Special Inspector General for TARP (SIGTARP) announced another victory in its fight to detect and punish fraud against banks that received funds as part of the Troubled Asset Relief Program. Michael W. Yancey pleaded guilty on Wednesday to one count of conspiracy to make false statements on a loan application. Yancey was a former senior vice president and commercial loan officer at TARP recipient Farmers Bank & Trust (Farmers Bank) in Great Bend, Kansas.
“SIGTARP investigations have uncovered instances in which senior bank executives committed fraud or other crimes against their bank prior to the financial crisis and then continued their schemes after the bank applied for and/or received federal taxpayer-funded TARP bailout funds,” said Christy Romero, Special Inspector General for TARP (SIGTARP).
“In this case, Yancey, a former senior vice president and commercial loan officer at TARP recipient Farmers Bank & Trust, lied about the true terms of a loan he secured on behalf of a bank customer in order to get the loan approved by the bank’s loan committee. Then, after the bank received TARP funds, Yancey recommended that the bank renew the loan without correcting the falsified information on file about the loan. Ultimately, Farmers Bank wasn't able to repay its TARP investment in full.”
In March 2007, Yancy assisted a bank customer in obtaining an $825,000 commercial loan for the purchase of real estate. The customer presented Yancy with a falsified contract for sale which stated the purchase price to be 1.1 million dollars. In reality, the purchase price of the property was $850,000. Yancy, knowing the contract had been falsified, included it in the bank’s file.
Yancey and the bank customer inflated the purchase price in order to make it appear that the loan conformed to a maximum 75 percent loan-to-value ratio, which would allow the loan to be approved by the bank’s loan committee. The scheme worked. The loan committee approved the loan without issue.
Additionally, Yancy petitioned the bank to approve a large line of credit for the bank customer by falsely stating that the real estate transaction involved a seller carryback in the amount of $150,000 and a borrower equity injection in the amount of $125,000. In subsequent years, Yancy continued to recommend the renewal of the loan.
In June 2009, Farmers Enterprises, Inc., of Great Bend, Kan., the parent company of Farmers Bank, received $12 million in federal taxpayer funds through TARP. In November 2012, the Treasury Department sold its TARP investment in Farmers Enterprises back to the bank for approximately $11.5 million, as the bank exited the program. The bank’s repurchase of the shares at a discount in a loss to the taxpayer in the amount of $500,000.
“Crime against a TARP bank is crime perpetrated against the federal taxpayers who funded the TARP bailout. SIGTARP and our law enforcement partners will bring to justice perpetrators of crime related to TARP and hold them accountable for their actions," Romero continued.
Yancey faces a maximum penalty of five years in federal prison and a fine up to $250,000.