Failed Bank Exec First to be Charged with TARP Fraud

Over the weekend, ""regulators closed down"":http://dsnews.comarticles/four-more-community-banks-closed-by-regulators-2010-03-15 Manhattan's Park Avenue Bank, citing ineffective management and inadequate capital. And on Monday morning, the failed bank's former president and chief executive, Charles J.[IMAGE]Antonucci Sr., found himself in handcuffs â€" the first person to be charged by the federal government with defrauding the Troubled Asset Relief Program (TARP).

According to ""the complaint filed"":http://www.justice.gov/usao/nys/pressreleases/March10/antonuccicharlesarrestpr.pdf by the U.S. attorney for the Southern District of New York and unsealed by the court on Monday, Antonucci faces allegations of self-dealing, bank bribery, embezzlement of bank funds, and attempting to fraudulently obtain more than $11 million worth of taxpayer rescue funds from TARP.

Antonucci is charged with using his position at the bank to defraud and deceive the New York State Banking Department and the FDIC into believing that he had invested $6.5 million of his own money in the bank to try and improve its capital position. But according to prosecutors, Antonucci had, in fact, fraudulently borrowed the funds that he purportedly invested from the bank itself through other entities and businesses that he was associated with. Antonucci's $6.5 million investment of the bank's own money gave him 308,349 shares of common stock and a 52 percent controlling interest in the Park Avenue Bank's holding company.

Antonucci provided false information to the FDIC to support his scheme when the agency began looking into

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the matter last year, and then used the $6.5 million transaction to support an application for more than $11 million in taxpayer rescue funds through TARP. When Antonucci was advised by the FDIC that it would not recommend approval of the Park Avenue Bank's TARP application, he withdrew the application voluntarily.

During a subsequent interview, Antonucci was quoted as claiming the bank withdrew its application because of ""issues"" with TARP, and the desire to avoid ""market perception"" that ""bad bank[s]"" take TARP money.

He also stated, ""[I]n conjunction with withdrawing the application, we are also putting additional capital in. The capital is coming primarily from myself and other members of my board. It is the insiders that are investing capital into the bank, so the message to the depositors is that at this point, I don't need TARP money, I don't necessarily want TARP money, we are a strong bank, and management is committed to putting capital in as it is needed.""

In addition, Antonucci is accused of violating bank bribery laws in support of his lavish lifestyle by accepting freebies from clients, including use of a private plane. He also allegedly forced the Park Avenue Bank to improve, lease, and pay expenses for properties he personally owned, and is said to have stolen more than $103,000 from a Florida church.

After growing Park Avenue Bank's business from assets of $100 million at the end of 2004 to $500 million, primarily from commercial real estate (CRE) loans made during the height of last decade's boom, Antonucci stepped down from his post as president in 2009. But all those historically profitable commercial loans proved to be the catalyst of the bank's demise when property values took their tumble.

The _Wall Street Journal_ cited data from Foresight Analytics that showed delinquencies on CRE loans held by Park Avenue Bank jumped to 23 percent at the end of last year, up from 18 percent in 2008 and 7.7 percent in 2007.

Antonucci was released on bail Monday. If convicted, he could receive up to 260 years in federal prison.