Troy Foquet, a real estate developer in Hammond, La., pleaded guilty to defrauding a community bank once approved for a federal bailout.

The Special Inspector General for the Troubled Asset Relief Program uncovered the scheme earlier this year and brought charges against Foquet and his lender at the bank. Reginald Harper, the former CEO of First Community Bank of Hammond, allegedly wrote a $2 million loan to Foquet for a local real estate development.

They allegedly struggled to find qualified homebuyers, and according to court documents used "straw" borrowers to create the appearance a buyer was taking out a mortgage. The proceeds from the fake loans allegedly went to pay off the original amount for the land.

Often, Foquet simply wrote bad checks to Harper, who then allegedly credited the payments to the First Community books knowing Foquet didn't have the funds behind the checks.

Harper was charged with consipracy as well.

First Community was approved for $3.3 million in TARP funds, but the bank withdrew its application.

"The housing crisis is not an excuse to commit fraud against banks that serve as lifelines for their communities. This type of bank fraud results in real economic consequences to everyone in the community," said Deputy SIGTARP Christy Romero.

Fouquet faces up to five years in prison and a $250,000 fine. Sentencing is scheduled for June 7.