Top Orion Bank Executives To Prison

The list of people charged with financial fraud involving TARP rescue funds is growing.  And some are going to prison.  

Now, Orion Bank executives, and a former Orion Bank borrower, can be added to the group.
 
Thomas Hebble, former Executive Vice President of Orion Bank, has been sentenced to 2 1/2 years in prison; Angel Guerzon, former Senior Vice President of Orion Bank, has been sentenced to 2 years in prison; and Francesco Mileto, a former Orion Bank borrower, has been sentenced to 5 1/2 years in prison. The three participated in a conspiracy to mislead state and federal regulators that Orion Bank was in a better capital position than it was in truth and fact. As part of their sentence, the court also entered a money judgment in the amount of $2 million, part of the proceeds of Mileto's charged criminal conduct.
 
Christy Romero, Acting Special Inspector General for the Troubled Asset Relief Program, said that, “Hebble and Guerzon falsified the bank’s books to hide that Mileto’s investment in the bank was nothing but an illusion. They lied to regulators that the bank’s capital had improved, attempted to get $64 million in TARP funds to fill the hole that turned out to be fraud, and drove the bank into the ground.”
 
According to prosecutors:
 
In October 2008, Orion Bancorp, Inc. unsuccessfully sought $64 million in federal government assistance through TARP. Hebble, Guerzon, and Mileto pleaded guilty on May 2, 2011. According to court documents, the conspiracy to which the defendants were sentenced had two objectives: 1) to finance the sale of promissory notes secured by mortgages held by Orion Bank on distressed properties, thereby creating the illusion that non-performing loans were performing loans, and 2) to conceal the financing for the sale of Orion Bancorp, Inc. stock to a borrower in order to create the illusion of a legitimate capital infusion into the bank. The defendants accomplished these objectives by falsifying the books and records of Orion Bank and deceiving state and federal regulators over a period of seven months, from May 2009 until November 13, 2009.
 
As part of the scheme to defraud, the defendants increased loans-in-process to nominee entities associated with Mileto to $82 million, including a $26.5 million line of credit. Within the lines of credit, the bank concealed $15 million of financing for Mileto's purchase of Orion Bancorp, Inc. stock, despite knowing that banking laws and regulations prohibited the bank from financing the purchase of its, or its affiliates', own stock. Top bank executives closed on the loans after discovering that Mileto had submitted fraudulent financial documentation to Orion Bank in support of the current loans, and in support of $41 million of previously acquired loans, in order to ensure the capital infusion to the bank.
 
Hebble also was sentenced for his participation in a second round-trip stock transaction which occurred in June and July 2009. As part of the scheme, Hebble and others increased the amounts of loans-in-process to an Orion Bank depositor to $18 million, in order to provide and conceal $7 million of financing for the purchase of Orion Bancorp, Inc. stock, despite knowing that banking laws and regulations prohibited the bank from financing the purchase of its, or its affiliates', own stock.
 
Orion Bank was closed on November 13, 2009, and the Federal Deposit Insurance Corporation was appointed as the receiver. The FDIC requested approximately $33 million in restitution for Hebble and Guerzon's participation in the scheme and a restitution hearing will be held to apportion liability among the defendants. The court ordered Mileto to pay restitution to the FDIC in the amount of approximately $65 million.