The former president and chairman of a failed Oklahoma bank could spend the rest of his life in federal prison, after a jury found him guilty of a series of fraud charges that involved personally approving fraudulent loans for real estate and other investments.

According to the U.S. Attorney’s Office for the Western District of Oklahoma, Paul Doughty, 67, the former president and chairman of First State Bank of Altus, was found guilty last week of 10 charges of bank fraud, conspiracy to commit bank fraud, misapplication of bank funds, making a false bank entry and unauthorized issuance of a bank loan in connection with First State Bank and various loan schemes.

In April 2015, a federal grand jury charged Doughty and an associate, Fred Anderson, with fraud related to three alleged loan schemes including a series of FSB loans to finance a real estate development in Routt County, Colorado.

Evidence presented during Doughty’s trial showed that in 2006 and 2007, Doughty and Anderson recruited buyers for 19 Colorado real estate lots priced at approximately $700,000 each. 

According to the U.S. Attorney’s Office, Doughty approved and issued 14 lot loans to buyers, totaling more than $10,000,000 in loan proceeds for the seller, Mountain Adventure Property Investments, a company that Anderson had an indirect ownership interest in and where he served as president and manager.

Evidence presented during the trial showed that each loan exceeded Doughty’s individual lending authority at FSB, and most of the loans were issued without approval of FSB’s loan committee, including a $580,000 loan to Anderson’s personal company.

Doughty and Anderson allegedly presented lots to borrowers as "zero money down" investments, and down payments for the purchases were often advanced or refunded to the buyers by Anderson on behalf of Mountain Adventure Property Investments.

But that’s not all. Doughty and Anderson also told the buyers that MAPI would make all payments on the loans to the bank.

The jury also heard that on the few occasions when Doughty actually presented a Colorado loan to FSB’s loan committee, he misrepresented the source and amount of the borrowers’ down payments and the borrowers’ responsibility for making payment on the loans.

In connection with these Colorado lot loans, the jury convicted Doughty of one count of bank fraud conspiracy, four counts of bank fraud relating to separate lot loans, and one count of unauthorized issuance of a loan to Anderson’s personal company.  

Doughty was also found guilty for his involvement in two other schemes: a series of "senior life settlement loans" from FSB to support an Altus aerospace company; and a $2 million unauthorized loan from FSB to a company under Doughty and Anderson’s control. 

In one of those schemes, in January 2008, Doughty arranged a $2 million loan from FSB to Ethanol Products Group, a startup company that both Anderson and Doughty had ownership interests in. 

Evidence presented during trial showed that Doughty advanced the $2 million from FSB, above his individual lending authority, without approval by FSB’s loan committee or board.

Just before issuing the loan, Doughty emailed Anderson his "cash strategy" for two other companies they controlled.

According to the U.S. Attorney’s Office, the "strategy" was actually diverting all the EPG loan proceeds to companies controlled by Anderson and Doughty, leading ultimately to $100,000 in “officer bonuses” being given to Anderson and Doughty. 

The jury found Doughty guilty of one count of unauthorized issuance of a loan and one count of misapplication of bank funds related to the EPG loan.

Coincidentally, in July 2009, state banking regulators closed FSB due to the bank’s loan losses.

On April 14, 2016, Anderson pleaded guilty to a one count of conspiring with Doughty to commit bank fraud. As part of his plea agreement, the government agreed to dismiss at sentencing the charges against him from the indictment, in exchange for Anderson testifying as a witness for the government at Doughty’s trial. 

At sentencing, Anderson faces up to five years in prison and a fine of $250,000.

Doughty, on the other hand, faces up to 30 years in prison and a fine of $1 million for each of the ten counts of conviction.