Feds Charge Two Former Integrity Bank Execs And Hotel Developer With Fraud

Two former Atlanta-based Integrity Bank executives, Douglas Ballard and Joseph Todd, and hotel developer Guy Mitchell of Coral Gables, Florida, have been charged with various acts of conspiracy, bribery, bank fraud and/or securities fraud relating to over $80 million in loans that Mitchell obtained from Integrity Bank. 

According to the government:  From 2004 to 2007, Mitchell and companies he controlled obtained more than $80 million in various supposed business loans from Integrity Bank. He allegedly obtained much of these funds under false pretenses, and deposited nearly $20 million of these business loans in a personal checking account, in which he made millions of dollars worth of personal luxury expenses and withdrew substantial amounts of cash. Among his personal expenses was over $1.5 million spent on a private island in the Bahamas.
 
The indictment alleges that: While Mitchell was spending much of the loan proceeds on himself, Mitchell paid little, if any, of his money back to Integrity to satisfy interest payments. Rather, with the assistance of individuals within the bank, Mitchell paid interest on existing loans by taking draws or disbursements from other loans, and continually borrowed more and more money to keep paying the ever-increasing interest payments.
 
The indictment specifically focuses on three loans totaling approximately $20 million in 2006, which the indictment alleges were dispersed under false pretenses at the alleged approval and direction of Ballard, Integrity’s former Executive Vice President. In one example charged in the indictment, Mitchell requested and Ballard helped disperse nearly $7 million out of a construction loan relating specifically to supposed construction and renovation at the “Casa Madrona,” a luxury hotel owned by Mitchell in Sausalito, California. The indictment alleges that none of this money was used for construction, and in fact no renovations had occurred. Rather, according to the government, most of the funds were wired directly to Mitchell’s personal checking account, and used by him for personal purchases or cash, and the remainder was used to pay interest due on older Mitchell loans.
 
The indictment also alleges several acts of bribery. The indictment charges that Mitchell corruptly paid and Ballard corruptly received over $230,000 in a nine month period – half in cash and half in a cashier’s check – as a reward for Ballard’s assistance in Mitchell’s fraud. The indictment alleges that both Ballard and Mitchell corruptly discussed other personal business opportunities that Ballard would receive for assisting Mitchell.
 
The indictment also alleges that Ballard evaded bank reporting requirements to avoid scrutiny of his cash deposits. And the indictment alleges that Ballard and his colleague, fellow bank Vice President Foster, committed securities fraud by engaging in “insider trading.” Specifically, they allegedly sold nearly all of their shares of Integrity stock based on materially adverse secret information about the company – specifically relating to substantial problems with the loans to Mitchell – which they knew was not generally known to the public. The indictment charges that in essence they allegedly took advantage of secret inside information to sell stock that they knew to be overvalued, to others who did not share the same information.
 
The bank fraud and bribery charges against Mitchell and Ballard each carry a maximum sentence of 30 years in prison, the evasion of reporting requirements charges against Ballard carry a maximum of 10 years in prison, the securities fraud charges against Ballard and Foster carry a maximum of 20 years in prison and the conspiracy charge against Mitchell and Ballard carries a maximum of 5 years in prison. Each of the charges also carries a potential fine of up to $1 million.