Atlanta bank exec pleads guilty to fraud

On paper, the loan shop run by Jeffrey L. Levine at Omni National Bank appeared golden.

The division of the small Atlanta bank reported robust profits for much of the past decade, powered by loans to borrowers who wanted to flip houses in low-income neighborhoods.

But the profits were largely a mirage, federal prosecutors discovered. The loans Omni doled out quickly ran into trouble as borrowers -- many of whom had little money and poor credit -- defaulted, pushing the homes into foreclosure.

Levine, 68, Omni’s executive vice president, pleaded guilty Thursday to bank fraud for altering the books to obscure the losses and grossly mislead bank regulators, shareholders and others.

He is believed to be the first Georgia bank executive to face jail time -- up to 30 years -- for his actions during the state’s banking crisis. Thirty Georgia banks including Omni have failed, the most of any state.

Levine is scheduled to be sentenced on March 23 and could also face a $1 million fine.

The plea came 10 months after Omni failed amid a mountain of bad real estate loans. Unlike most of the Georgia banks that have failed, Omni was in such bad shape that no buyer could be found. The failure is expected to cost $290 million, federal regulators said.

“This case demonstrates the damage that can result when senior bank officials ignore rules and regulations designed to protect a bank by identifying bad loans,” said Sally Quillian Yates, acting U.S. Attorney for the Northern District of Georgia.

The case against Levine emerged as part of a wide-ranging probe into Omni by federal prosecutors that has also ensnared three Omni customers, including a Lithonia man, Delroy Davy, who is accused of paying kickbacks to an Omni loan officer and obtaining fraudulent loans from the bank.

In an e-mailed statement, Levine’s attorney, Jack Williams, said his client is cooperating with the government’s continuing investigation of Omni and has suffered “severe financial loss” as a result of the bank’s failure.

“He sincerely regrets his errors in judgment and mistakes in management,” Williams said.

Levine and his business partner, Stephen Klein, founded Omni in 2000, growing the bank quickly to include branches in seven other cities including Chicago, Tampa, Houston and Dallas.

The bank’s strategy was to make high-interest, short-term loans to low-income borrowers who would use the cash to buy and fix up inner-city houses. The borrowers, in theory, would make a profit when they sold the house or rented it through the federally subsidized Section 8 program, prosecutors said.

Levine and others at Omni ran afoul of a host of rules and regulations, the government said. For example, the bank made loans to multiple borrowers that exceeded the amount the bank could lend to an individual.

The bank failed to set aside sufficient reserves to cover losses from bad loans or to properly record them on Omni’s books, prosecutors said.

Under Levine’s direction, Omni cleared some foreclosures off its books by financing loans to new buyers. The bank would sell the properties at inflated prices, the government said. Some foreclosures were never noted on Omni’s books.

The bank’s practices ultimately contributed to more than 500 foreclosures and another 500 non-performing loans, resulting in $7 million in losses to the Federal Deposit Insurance Corp.

Fallout from the bank’s illegal practices was widely felt, according to prosecutors. A number of Omni-owned homes rented to low-income families were not fixed up properly, while others remained vacant for extended periods or were taken over by squatters.

“Families receiving Section 8 rental subsidies should expect safe, decent and sanitary housing,” said Kenneth Donohue, inspector general with the U.S. Department of Housing and Urban Development. “In this case, poor stewardship and management of the properties has negatively affected the neighborhoods and the entire community.”

Three other people face charges related to Omni loans:

Davy, 37, was charged in December with bank fraud in a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni as well as other lenders. He plans to plead guilty later this month, prosecutors said.

Mark Anthony McBride pleaded guilty last April to taking out millions of dollars in fraudulent loans from Omni and other banks. McBride, 43, of East Point, is in jail awaiting sentencing.