The former chief executive officer, chief information officer, and chief financial officer of the Federal Home Loan Bank of Dallas stand accused of defrauding the bank out of more than $1.2 million by allegedly seeking reimbursement for a number of lavish personal trips taken under the guise of business travel.
According to the U.S. Attorney’s Office for the Northern District of Texas, an indictment returned this week by a federal grand jury charges Terence Smith, who served as president and CEO of FHLB Dallas from 2000 to September 2013; Nancy Parker, who served as FHLB Dallas’ CIO from 1999 through November 2013; and Michael Sims, who served as CFO of FHLB Dallas from 2005 to May 2014, with one count of conspiring to make false statements to FHLB Dallas.
Additionally, Smith is also charged with 11 substantive counts of making false statements to the FHLB Dallas, Parker is charged with six substantive counts of making false statements, and Sims is charged with three substantive counts of making false statements.
The indictment alleges that beginning as early as January 2008 and continuing through November 2013, Smith, Parker, and Sims, took more than 30 trips for work, claiming that they were traveling to locations like Las Vegas; Amelia Island, Florida; Coronado, California and San Diego to attend conferences and conduct other business-related activities.
After returning from the “conferences,” Smith, Parker, and Sims expensed their travel-related expenses, but according to the indictment, the FHLB Dallas execs did not actually attend any of the conferences in question or conduct any business, at all.
Specifically, the indictment alleges that Smith, Parker, and Sims expensed “first-class airfare, limousine services, concerts, vineyard tours, luxury hotel rooms, lavish meals, and expensive liquor and wine,” while they were supposedly attending various conferences, planning meetings, strategy meetings, and ops meetings.
Rather, the indictment states that Smith, Parker, and Sims allegedly turned the “business trips” into lavish vacations, lied about the nature of their travels, and conspired to cover it up.
All total, their alleged malfeasance cost FHLB Dallas approximately $780,000.
The indictment also alleges that in addition to taking a significant number of business trips that amounted to company-paid vacations, Smith, Parker, and Sims further defrauded FHLB Dallas by requesting payment of more than $450,000 for unused vacation time.
The indictment further alleges that Parker separately conspired to embezzle additional money from FHLB Dallas as part of a scheme to have the bank pay for Christmas gifts for Smith.
Parker is also charged with three substantive counts of embezzlement related to the Christmas gift scheme.
Specifically, the indictment alleges that from at least December 2005 through December 2012, Parker conspired with a former contractor who later became an employee of FHLB Dallas to submit an inflated contractor invoice, fictitious check requests, and a fictitious purchase order to the bank. Those documents were allegedly used to embezzle more than $17,000, which was used to buy gifts for Smith.
According to the indictment, Smith found a number of presents under his Christmas tree that were actually paid for by his employer, including a “wine sommelier computer,” which cost more than $5,400, a Canon video camera and equipment, which cost nearly $4,700, and a photo printer, which cost nearly $4,800.
As stated in the indictment, Smith, Parker, and Sims are each former employees of FHLB Dallas.
Smith resigned from his position in September 2013. FHLB Dallas announced his departure in a brief release, which was published on Sept. 24, 2013. The release did not state a reason for Smith’s departure.
A related filing with the Securities and Exchange Commission showed that Smith was to receive a separation payment of $220,000, plus an additional $170,000 in additional money, as part of his resignation agreement.
But it appears that Smith had to pay some of that money back last year, sort of.
In February 2016, the Federal Housing Finance Agency reached a pair of settlements with Smith and Parker, which required each of the former FHLB execs to pay back more than $130,000 that they received as reimbursement for travel expenses.
The FHFA is the regulator of the Federal Home Loan Bank system.
Specifically, Smith was required to pay $156,096.50 to FHLB Dallas for travel expenses he incurred between 2010 and 2013. The settlement states that Smith did not admit to any wrongdoing.
Parker’s settlement required her to pay $130,296.30 back to FHLB Dallas under similar conditions.
Both Smith and Parker also agreed to not accept employment from or be directly or indirectly compensated for any work with any Federal Home Loan Bank, Fannie Mae, and Freddie Mac.
When contacted by HousingWire, a spokesperson for the Federal Home Loan Bank of Dallas provided the following statement on the bank’s behalf: “In 2013, the Bank took action when it uncovered conduct believed to be in violation of Bank policies. The Dallas Bank is cooperating fully with authorities. This matter from years past is not financially material to the Bank and will not hinder in any way our ability to fulfill our mission to serve our members so that they may serve their communities.”
According to the U.S. Attorney’s Office, each count of making a false statement carries a maximum statutory penalty of 30 years in federal prison and a $1 million fine. Each count of conspiracy to make a false statement carries a maximum statutory penalty of five years in federal prison and a $250,000 fine.