A former bank collections manager for Washington Mutual pleaded guilty to accepting bribes from a collections agency in exchange for business referrals.

The issue came to a head when Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP), started investigating executives at Oxford Collection Agency for allegedly ripping off WaMu and other banks that received TARP funds years ago.

Before U.S. District Judge Stefan R. Underhill in Bridgeport, Conn., Romero says Michael Gesimondo, 57, of Farmingdale, N.Y., pleaded guilty to accepting kickbacks while serving Washington Mutual as a collections manager.

"While the nation struggled through the financial crisis, rather than collect the debts of banks, executives at Oxford ripped-off TARP recipients and Washington Mutual in a $12 million debt fraud scheme, and Gesimondo shared in their spoils," Romero said.  

 "Oxford executives collected funds on behalf of Washington Mutual and then made bribe payments to Gesimondo that equaled a percentage of the funds collected.  After Washington Mutual was closed and purchased by TARP recipient JPMorgan Chase, Gesimondo spoke with Oxford executives about the vast increase in scale of his potential collections business," Romero explained in a press release.

Oxford Collection Agency previously functioned as a private financial services company.

SIGTARP claims its investigation revealed Oxford was in a multi-year scheme to defraud a lender, investors and clients. The company also bribed banking officials, SIGTARP alleges.

WaMu was closed by federal regulators in Sept. 2008, and its operations were sold off to JPMorgan Chase (JPM) – a major recipient of TARP-taxpayer funds. JPM repaid the funds and dropped its opposition against related liabilities, but SIGTARP ended up investigating the prior actions of Gesimondo, which occurred during his time at WaMu.

Poor performance in its mortgage portfolio drove net losses, and though it exited those operations six months before the sell off, it wasn't enough to keep the bank around.

The fact that Gesimondo pled guilty to one count of "conspiracy to accept money as a reward in connection with a business transaction of a bank," may help provide some answers into why things ended so poorly for Washington Mutual.