Gary Rickenbach, a former senior executive vice president at One Bank, testified Thursday and Friday about behind-the-scenes maneuvers he and other bankers took in 2008 to try to prevent the bank from losing $1.5 million, plus interest, from a line of credit that was never repaid.
Rickenbach was called to the witness stand by federal prosecutors who are trying to convict former One Bank executives Michael Francis Heald and Bradley Stephen Paul, who worked alongside Rickenbach, on charges of bank-fraud conspiracy and making false bank entries.
Prosecutors say the three men and two others conspired to hide the bad loan from federal regulators and nonbanker members of the bank's board of directors from December 2007 through September 2012.
The other two men were Tom Whitehead, the bank's former chief financial officer, whose charges were dropped in December, and Layton "Scooter" Stuart, the former bank chairman and chief executive officer who died in the spring of 2013, several months after federal regulators ousted him from the bank.
Heald was the bank's other senior executive vice president and chief operating officer, and Paul was an executive vice president. Both have denied wrongdoing, and both earlier refused to accept plea bargains to reduced charges of misprision -- the same charge to which Rickenbach pleaded guilty in exchange for a favorable sentencing recommendation. Misprision is knowing about a crime but failing to report it.
Rickenbach, whose testimony will continue when the trial resumes at 9 a.m. Monday before U.S. District Judge Kristine Baker, readily answered questions from Assistant U.S. Attorney Pat Harris. But Rickenbach hesitated when asked pointed questions about the actions of Heald, a close friend of many years, and Paul, an acquaintance with whom he was friendly.
Rickenbach often rejected Harris' phrasing to specify that he undertook certain actions and that Heald and Paul were remotely involved.
The bank extended the $1.5 million line of credit on April 10, 2007, to Albert Solaroli of Jacksonville, Fla., a race-car builder who is serving a year in prison after pleading guilty in February to a money-laundering charge. Solaroli was supposed to make interest payments on the loan every quarter and pay off the loan within a year, but he never made any payments.
Rickenbach confirmed that he began to worry about repayment after the first quarter came and went without Solaroli making his promised $30,433 interest payment. Rickenbach testified that he had conversations with Solaroli during that time, and Solaroli kept citing unexpected delays, promising to make a payment once he received funds he was expecting from overseas.
Until the second quarter, Rickenbach testified, he had no concerns that Solaroli, who had been introduced to Rickenbach by a longtime customer, wouldn't repay the funds on time.
Harris has suggested that the bankers sought out two investors to eventually "buy out" the Solaroli loan, not only to keep the bank from losing the money but to make the bank appear better off so it would be eligible for a $17.3 million loan it received through the federal government's Troubled Assets Relief Program. The federal loans were offered to many banks in the wake of the 2008 financial crisis.
Rickenbach acknowledged that he asked the customer who had steered Solaroli to the bank to make the first interest payment, which the customer did. After that, Rickenbach said, the bank kept "bumping" the due date for the next payment, expecting the situation to resolve itself. He insisted that Stuart didn't know details of the arrangement at that point nor had Stuart harassed him about it, but he said Stuart was generally aware of the outstanding funds.
After the loan came due on April 10, 2008, without Solaroli repaying any of the principal or interest, Rickenbach said it was clear Solaroli was "a blatant liar" and a con man, so the bank hired attorneys in Florida and sued Solaroli. He said the bank soon learned that Solaroli had transferred $750,000 of the $1.5 million loan to make a "final payment" on a Porsche race car, and that he had also used the money to buy another Porsche.
Meanwhile, Rickenbach said, he continued to try to work out a plan for one of the investors to buy out the loan, including the interest, with another loan.
Rickenbach testified that Stuart, who didn't like that investor, got more involved then, insisting that a second investor join the buyout plan.
Though the line of credit and the interest were eventually covered by what Rickenbach called "a group effort," prosecutors maintain that the false bank entries intended to hide the bank's situation from regulators put the bank and its depositors at risk.
As evidence of the secretive maneuvers, Harris showed an email that Rickenbach acknowledged sending on May 7, 2009, to Stuart, informing the bank chairman that he had just spoken to a bank examiner and there were "no issues" with one of the buyout loans.
Rickenbach wrote that he told the examiner that the loan in question "was to extract equity for development purposes." The email noted, "No reference to the other situation. He seemed satisfied with that."
The email indicated that a copy had been sent to both Heald and Paul.
It wasn't until late in 2008 that Rickenbach secured firm commitments from his initial investor and Stuart to proceed with the buyout plan, he testified. He said that's when he took the Solaroli loan off the bank's books as a delinquent loan and included its principal and interest as part of the bank's assets.
He told defense attorney Gary Corum that his actions constituted an appropriate accounting transfer.
Metro on 10/15/2016