Bank failures draw criminal probes
Federal authorities have opened criminal investigations into a number of bank failures in northern Georgia, U.S. attorney Sally Yates told the Atlanta Journal-Constitution on Wednesday.
“The northern district of Georgia has had more bank failures than any other district in the nation,” Yates said. “Not every one of these is attributable to criminal fraud, but some are.”
Yates declined to say which failed banks her office is probing or how many are under investigation. She also declined to say when charges would be brought.
“We’re trying to get to the bottom of these cases as quickly as possible,” she said.
Since 2008, 37 banks have failed in Georgia, more than in any other state.
Most were small lenders in metro Atlanta or in the north Georgia mountains that ran into trouble when huge pools of real estate loans defaulted.
Every time a bank fails, federal banking regulators pore over financial records in search of possible wrongdoing. Potential problems are forwarded to federal prosecutors for further review, said Walt Moeling, a veteran Atlanta banking attorney whose firm, Bryan Cave Powell Goldstein, represented either the bank or board of directors of at least half the state’s failed institutions.
Moeling said he’s not surprised charges may be coming, though he said some of the fraud may involve unscrupulous borrowers, not bankers.
“We’ve known there were issues with certain banks, and certainly some banks were the victim of fraud,” he said. “There were people out there doing some strange things.”
If past bank failures are a guide, Moeling said he expects prosecutors to go after banks for violating regulations, such as lending too much to one borrower, or investigate bank customers for diverting funds from their intended purpose.
"Banking is a very structured business. It has fairly tight rules," he said. "You are expected to abide by those rules. In retrospect sometimes people fudged, ignored or just flat-out violated. Those people run the risk of being held accountable."
U.S. attorneys have already brought charges against a bank official and several borrowers of one failed Georgia bank, Atlanta-based Omni National, which became embroiled in a wide-ranging probe of mortgage fraud.
In January, Omni’s executive vice president, Jeffrey Levine, pleaded guilty to altering the bank’s books to obscure losses. Three borrowers also face charges for defrauding the bank.
Another failed bank, Alpharetta-based Integrity Bank, has been under investigation by the FBI and the Federal Deposit Insurance Corp. for possibly violating regulations when it lent tens of millions of dollars to a Florida real estate developer.
Yates said bank fraud cases involve reams of records and numerous witnesses.
“While we want to move quickly,” she said, “we also want to move carefully and make sure the charges are fair and accurate.”
About the Author
Bill Rankin has been an AJC reporter for more than 30 years. His father, Jim Rankin, worked as an editor for the newspaper for 26 years, retiring in 1986. Bill has primarily covered the state’s court system, doing all he can do to keep the scales of justice on an even keel. Since 2015, he has been the host of the newspaper’s Breakdown podcast.
