Trial of 2 ex-bankers now shifts to defense

On Tuesday, the second day of the third week of a bank fraud trial against two former top executives at One Bank & Trust, federal prosecutors rested their case.

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When the trial resumes at 9 a.m. today before U.S. District Judge Kristine Baker, defense attorneys for Michael Francis Heald, 56, and Bradley Stephen Paul, 54, will begin presenting testimony that they hope will sway the jury of four women and eight men to acquit the former bankers.

Jurors were told that the trial wouldn't last beyond two weeks, and the extension of the trial into a third week prompted the judge to excuse one juror Monday. That juror, who said during jury selection that he didn't want to miss important business meetings this week, was replaced with one of two alternates.

Heald was senior executive vice president and chief operating officer of the Little Rock-based, federally insured institution until he left in July 2011. Paul was an executive vice president who served on the loan committee until late 2014.

Both are accused of conspiring with three others, including the now-deceased former chief executive officer and owner of the bank, to hide a bad $1.5 million line of credit from federal regulators and nonbank members of the bank's board of directors between 2007 and 2012. Their intention, prosecutors say, was to prop up the bank's worth to make it eligible to receive a $17.3 million loan through the government's Troubled Asset Relief Program in the wake of the national economic crisis.

Without any hint of the $1.5 million line of credit on the bank's books because of false bank entries meant to disguise it and two other loans engineered to counteract it, the bank ultimately received the TARP loan.

The biggest of the two loans designed to "buy out" the bad loan was one for $1 million taken out by Crestwood, a company formed by the bank's former owner, Layton Stuart, to buy and resell three properties on Crestwood Drive in the Heights neighborhood of Little Rock. The smaller loan was taken out by an investor who had referred the recipient of the $1.5 million line of credit to the bank.

Federal regulators ousted Stuart in 2012, and he died in March 2013. The government later sued his estate to seize $17.7 million of his assets that it said he had purloined from the bank to finance an extravagant lifestyle for himself and his family.

Defense attorneys say the two loans engineered by Gary Rickenbach, a former senior executive vice president of the bank, to "buy out" the bad loan resulted in the bank suffering no losses from the defaulted line of credit. Rickenbach pleaded guilty to a reduced charge and spent several days testifying as a government witness.

But prosecutors presented testimony Monday to show that the bank lost $535,575.17 as a result of the executives' machinations.

Jim Schnoes, the bank's current chief financial officer, said he meticulously reviewed bank records to calculate that total amount of loss, to One Bank and its holding company, as a result of the series of improper maneuvers made by bank executives to cover the $1.5 million defaulted loan.

Prosecutors say the illegal actions misrepresented the bank's true financial status to federal regulators, endangering the money of the bank's depositors.

Metro on 10/26/2016

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