Reginald Harper, former CEO of First Community Bank of Hammond, La., pleaded guilty to defrauding the firm out of millions of dollars in phony mortgages.

Harper faces up to five years in prison and a $250,000 fine. His sentencing is scheduled for Sept. 13. First Community applied for and was approved for $3.3 million in Troubled Asset Relief Program bailouts in 2008 but withdrew its application afterward.

Four years prior, Harper loaned $2 million to real estate developer Troy Foquet in 2004 to build out parcels of real estate, according to the charges.

Once it became difficult to find qualified homebuyers, Harper would loan potential buyers money to make it appear to the mortgage lender the borrower had more cash than they actually did. He also used "straw" buyers to obtain mortgages, which were used to pay off the original loans to Foquet.

Foquet also paid Harper with insufficient checks, which were credited as a loan payment in order to avoid reporting the delinquency.

Foquet pleaded guilty to the charges in March.

"Executives had the choice of writing off losses on bad loans or covering up those losses through fraud," said Special Inspector General for TARP Director Christy Romero. "Harper chose the latter and concealed the status of the loans from others at First Community Bank, from the bank's regulators and in the bank's TARP application."