The former CEO of a failed bank and the former chairman of the bank’s board of governors conspired to fake millions of dollars in investments in the bank as part of a scheme to defraud the federal government of more than $13 million from the Troubled Asset Relief Program, a federal jury ruled this week.
The former president and CEO of NOVA Bank, Brian Hartline, and Barry Bekkedam, who was once the bank’s board chairman, were convicted earlier this week of criminally defrauding the government in their attempt to get more than $13 million in TARP funds.
According to the office of the Special Inspector General of the Troubled Asset Relief Program, Hartline, Bekkedam and others founded NOVA Bank in 2002. By 2008, the bank “faced the risk of failure” due to bad loans and investments.
In an attempt to save the failing bank, NOVA Financial Holdings, the parent company of NOVA Bank, applied for approximately $13.5 million in TARP funds.
According to SIGTARP, of the more than 700 banks that received approval to get TARP money, only seven had conditional approval.
NOVA Bank was one of the seven that were conditionally approved, and the government stipulated that the bank would only receive TARP money if it raised $15 million from investors.
That’s where Hartline and Bekkedam’s fraud scheme began, SIGTARP said.
Bekkedam and Hartline devised a scheme to make NOVA Bank appear more financially sound than it was by making it look like the bank was receiving funds from outside investors, but in reality, the bank was just recycling its own money to make it look like new money.
In one case, NOVA wired $5 million to the bank account of an unnamed Florida businessman. Then, approximately two hours later, the Florida man wired $5 million to an account used for investments in NOVA Financial Holdings, Inc.
In October and December 2009, Bekkedam and Hartline convinced two others to make similar “investments” using loans from NOVA, in efforts to make NOVA appear more financially sound than it actually was.
“Rather than bring outside money into the bank as the government required, they used the bank’s own money,” SIGTARP’s Christy Goldsmith Romero said. “In one two-hour transaction, the bank’s own money flowed out and then came right back into the bank. They hid this fact from the government, which wanted more money in the bank — not double counting of existing money.”
Bekkedam and Hartline also told and directed employees lie to the Department of Treasury about the “new funding.”
Ultimately, the bank did not receive TARP funds, failed in October 2012, and was subsequently closed by state and federal banking regulators.
“TARP fraud is a heinous crime,” Romero said. “Hartline and Bekkedam were convicted today for not telling the truth about the health of NOVA Bank to get TARP funds.
“The jury has brought justice to these bank executives who defrauded an emergency crisis-era rescue program,” Romero concluded. “The fact that the bank did not get TARP funds boils down to luck and timing, not because these defendants decided to come clean. The convictions of these bankers today is the reason why SIGTARP was created — to bring justice to bankers who commit fraud related to TARP.”