Former execs, borrowers of Bank of Commonwealth indicted in alleged fraud

A grand jury in Norfolk, Va., handed up a 25-count indictment for the alleged conspirators behind the fraud scheme that contributed to the collapse of the state’s Bank of the Commonwealth in 2011.

Ex-CEO Edward Woodward and former Commonwealth executives face a charge that the Federal Deposit Insurance Corp. estimates will cost the deposit insurance fund $268 million.

“Led by former CEO and Board Chairman Edward Woodard, these bank insiders and their favored borrowers allegedly conspired to hide the rapidly deteriorating financial condition of the bank through fraud,” said U.S. Attorney Neil MacBride.

The alleged crimes trace back to 2006 when the bank’s loans were “funded and administered without regard to industry standards or the bank’s own internal controls.”

By 2008, the bank saw a flood of troubled loans and foreclosed real estate but bank insiders allegedly hid this fact from their investors.

“They allegedly used scheme after scheme to conceal past-due loans and remove foreclosed property from the bank’s books,” said SIGTARP Special Inspector General Christy Romero. “Today’s charges allege that friends of the bank received sweetheart deals in return for helping mask the bank’s true financial position, and bank insiders personally benefited.”

Among those charged in the case, business partners Eric Menden and George Hranowskyj pleaded guilty to a $41 million fraud scheme at Commonwealth and a separate tax credit fraud scheme.

The investigation was conducted by Sigtarp, the FBI, IRS, FDIC and state attorneys in an ongoing effort to prosecute financial fraud.

For more information, read the SIGTARP press release here.

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