Regulators on Friday shut down a South Georgia bank tied to a mushrooming investment fraud allegedly engineered by a missing board member.
Montgomery Bank & Trust in Ailey, 170 miles southeast of Atlanta, long teetered on the brink of collapse because of bad loans made during the boom years. But a fraud allegedly perpetrated by the man once seen as the bank's white knight appears to have pushed it over the edge.
Aubrey Lee Price, a one-time metro Atlanta investment adviser and Montgomery Bank director, has been charged by federal authorities in New York with wire fraud for allegedly embezzling $17 million from the small Georgia bank, the U.S. Attorney's Office said this week.
He also allegedly defrauded more than 100 clients in Georgia and Florida in other investment vehicles he controlled, according to a separate complaint filed this week by the Securities and Exchange Commission.
Montgomery Bank is the sixth bank in Georgia to fail this year, and a nation-leading 80th to fail since mid-2008.
Federal authorities in New York have sought an arrest warrant for Price, 46, for wire fraud in a scheme involving improper transfers from the failed bank's securities portfolio into accounts he controlled. He is also accused of providing false account statements to the failed bank's management.
The FBI is searching for Price, who disappeared last month. A letter bearing his name was sent to friends and colleagues about the same time and said he had lost millions of dollars in client funds and suggested he intended to commit suicide. Authorities say he was last seen on a ferry leaving Key West, Fla., but he is still missing and no body has been found.
Price is believed to travel regularly to South America and owns property in Venezuela, authorities have said. His family has not responded to requests for comment.
In December 2010, an investment group Price controlled invested $10 million into ailing Montgomery Bank. Locals in the community of 450 people pitched in an additional $4 million.
The deal was lauded in Georgia banking circles as a rare bid to save a distressed community institution from the brink.
Montgomery Bank was founded in 1926, and remained a slow-growing, but stable player in Montgomery and Toombs counties for much of its history. But a decision in the mid-2000s to expand to St. Simons Island proved disastrous
Despite the injection of new investor cash, the bank never seemed to shake off bad loans accumulated during its ill-timed expansion to the Georgia coast.
The bank lost nearly $37 million from the beginning of 2009 until March 2012, according to an AJC analysis of federal bank data.
Federal authorities said Price, as a director for the bank, took control of investing the bank's capital. Price allegedly wired funds to accounts he controlled at other banks, and provided false financial statements to bank management.
Chip MacDonald, a banking attorney with Jones Day in Atlanta, said Price might have been initially cast as a white knight, but his actions suggest "maybe he carried a black shield."
"This is pretty startling," MacDonald said, as Price, in his role as a non-executive board member, should not have had control over the bank's securities portfolio.
Beyond Price's alleged misdeeds, the federal complaint suggests the bank did not have proper oversight of Price and his trading activities, MacDonald said.
"These are the kinds of things internal controls are designed to prevent," he said.
Montgomery Bank was acquired by Moultrie-based Ameris Bank and its two branches will reopen under its new flag on Monday, according to the Federal Deposit Insurance Corp.
Ameris assumed all of Montgomery Bank's $164.4 million in deposits. The FDIC will retain the bulk of the failed bank's $173.6 million in assets
The failure is expected to cost the FDIC's insurance fund, which protects depositors in a bank failure, $75.2 million.
Shareholders in a bank failure are usually wiped out. Depositors are protected by the FDIC, which insures accounts up to $250,000 in most cases.
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