Two bankers, one investor sentenced for TARP fraud scheme
A district judge sentenced two executives of the closed Orion Bank and a large investor to prison this week and ordered them to pay a $2 million fine for a scheme to secure millions in bailouts from the Troubled Asset Relief Program.
Thomas Hebble, former senior vice president of Orion received two and a half years in federal prison, and Angel Guerzon, another former senior vice president, received two years. Francesco Mileto, a former Orion Bank borrower, received five and a half years for his role in the scheme.
In October 2008, Orion Bank was denied its application for $64 million in TARP funds. The Office of the Special Inspector General for TARP, the FBI and several federal regulators uncovered the scheme that went on from May 2009 to November 2009.
That same month, the Florida Office of Financial Regulation closed Orion. The Federal Deposit Insurance Corp. requested $33 million in restitution from Hebble and Guerzon for their participation in the scheme. A hearing will be held to determine the amount of liability for them. The court ordered Mileto to pay a $65 million fine to the FDIC.
Hebble, Guerzon and Mileto financed the sale of notes secured by nonperforming mortgages to make it seem as though the loans were performing. Mileto also secured $82 million in loans, including a $26.5 million line of credit from Orion to buy the bank's own stock.
A bank applying for TARP relief had to show it was able to raise private investments as well.
SIGTARP and the U.S. Attorney for the middle district of Florida Robert O"Neill asserted the conspirators wrote the loans and made the investments knowing bank laws and regulations prohibited the bank from financing the purchase of its own stock.
From June 2009 to July 2009, Hebble and others increased loans to one unnamed Orion Bank depositor to $18 million in order to conceal $7 million in financing for the purchase of Orion stock as well.
Acting Special Inspector General for TARP Christy Romero said simply Hebble and Guerzon falsified the bank's books to hide Mileto's investment in the bank, which was only 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," Romero said. "Fraudsters who tried to profit from TARP’s bailout during the financial crisis will meet swift justice by SIGTARP and its law enforcement partners."
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