After three weeks of testimony, a bank-fraud case against two former executives at One Bank & Trust was turned over to a federal jury Friday evening, with deliberations scheduled to begin at 8:30 a.m. Monday.
Jurors are considering allegations that Michael Francis Heald, 56, and Bradley Stephen Paul, 54, both of Little Rock, helped two other bank executives conceal a bad $1.5 million loan from federal regulators and nonbanker members of the bank's board of directors between December 2007 and September 2012. Heald and Paul are charged with conspiring to commit bank fraud and money laundering, and making false and misleading bank entries.
During three hours of closing arguments that followed U.S. District Judge Kristine Baker's hourlong oral reading of complex jury instructions, federal prosecutors told jurors that the four bankers came up with a plan to hide the loan even before it officially defaulted in April 2008 because the national economic crisis was looming.
Assistant U.S. Attorney Angela Jegley said the scheme consisted of doctoring internal bank documents and reports to federal regulators to "hide the true financial condition of the bank" while it sought millions of dollars through the government's Troubled Asset Relief Program.
The bank's financial situation was so dire after it had written off about $2 million in bad housing loans that by the time it received the $17.3 million in TARP funds in early 2009, the bank's holding company was down to just $55,000, First Assistant U.S. Attorney Pat Harris told jurors.
Jegley told jurors not to be confused by defense attorneys' efforts to focus on people and loans that weren't directly related to the overall scheme, which consisted of a chaotic stream of altering due dates on bank records and creating new loans to pay off the defaulted loan, and then other loans to pay off the new loans.
Harris acknowledged that Gary Rickenbach, the bank's senior executive vice president who pleaded guilty in December to a reduced charge, did "most of this stuff, no doubt about it." But Harris said the others knew what was going on and let it happen.
"All these guys go along," he said. "Nobody stepped up and said, 'This is wrong. We're not gonna do it.'"
Defense attorneys Gary Corum, for Heald, and Lloyd "Tre" Kitchens, for Paul, told jurors that Heald and Paul had the least involvement in the complicated scheme engineered by Rickenbach, and that they didn't intend to commit any crimes.
They said Rickenbach, now 59, kept details of the plan to himself, and led Heald, the bank's chief operating officer, and Paul, an executive vice president, to believe that actions they approved without fully understanding them were perfectly legal and in the bank's interest.
The bad loan that set into play the series of actions that later led to criminal charges against the bankers was a $1.5 million line of credit extended through Rickenbach in April 2007 to Alberto Solaroli of Jacksonville, Fla., who claimed he needed the money to develop a business idea.
The line of credit was scheduled to be paid off within a year, with quarterly interest payments to the bank of about $30,000. Solaroli, an investor and race-car builder, led Rickenbach to believe that he had more than adequate collateral, although stock in a company he owned turned out to be nearly worthless, prosecutors said.
Solaroli ended up never making a payment, though he always promised a payment was on its way. The bank sued him in 2009, obtaining a judgment of about $16 million, including interest, from a Florida court.
Rickenbach, who hadn't told his fellow bankers that he had invested $25,000 of his money with Solaroli, testified that he engineered a plan to keep the bank from counting the loan as a loss while it got paid off -- which it did. But he didn't reveal the extent of his actions until months later, when he wrote an apologetic memo to the bank's board of directors, admitting he had cut some corners.
Corum told jurors to recall testimony about actions Heald took to try to steer the bank's owner, Layton Stuart, from questionable maneuvers during that time. Stuart, who wasn't a banker, was ousted from the bank by regulators in the fall of 2012 and died in the spring of 2013.
"What more could an innocent man do than Mike Heald has done with this situation?" Corum argued. He said Heald's approval of actions to recoup the $1.5 million weren't "covering a loss," but paying back a debt, "which is a whole lot different."
Harris scoffed, "It was a small bank. They know what's going on. They all go out to lunch together, and they talk to each other all the time."
But Corum and Kitchens insisted that their clients were kept away from the fine details of the payoff plan that Rickenbach initiated. They said Rickenbach and Tom Monroe Whitehead, the bank's former chief financial officer who saw all his charges dropped after he agreed to cooperate with the government, were the only two members of the upper hierarchy of the bank who actually committed crimes. Whitehead testified that he allowed Stuart to pilfer money from the bank.
Metro on 10/29/2016