Former Wilmington Trust president, three others indicted

WILMINGTON — The U.S. Attorney’s Office, District of Delaware, announced indictments Wednesday against four men for their roles in concealing from the Federal Reserve, the Securities and Exchange Commission and investors the amount of past due loans on Wilmington Trust’s books from October 2009 until November 2010.

The 19-count superseding indictment also charges Robert V.A. Harra, 66, of Wilmington, David Gibson, 58, of Wilmington, William North, 55 of Bryn Mawr, Pennsylvania, and Kevyn Rakowski, 61, of Lakewood Ranch, Florida, with making false statements in securities filings and to agencies of the United States government.

A superseding indictment is an indictment that replaces a previous indictment and usually are filed when new evidence has been found and new charges need to be filed.

All four defendants have been charged with conspiracy to defraud the United States, to commit fraud in connection with the purchase and sale of securities and making false statements to regulators. All have been charged with one count of making false statements in connection with the purchase or sale of securities, four counts of making false entries in banking records, seven counts of making false statements to agencies of the United States government and two counts of making false statements in SEC reports.

Mr. Harra and Mr. Gibson also are charged with two additional counts of making false statements in SEC reports and Mr. Gibson is charged with three counts of falsely certifying financial reports. Mr. North and Mr. Rakowski previously were charged with two counts of making false statements to an agency of the United States, relating to the concealment from the market and the Federal Reserve the total quantity of past due loans on the bank’s books during the months of October and November 2009.

Wilmington Trust was required to report in its quarterly filings with both the SEC and the Federal Reserve the quantity of its loans for which payment was past due for 90 days or more. Investors and banking regulators consider the 90-day number in evaluating the health of a bank’s loan portfolio. According to the superseding indictment, Mr. Harra, Mr. Gibson, Mr. North and Mr. Rakowski helped conceal the truth about the health of Wilmington Trust’s loan portfolio.

The indictment alleges the four men participated in Wilmington Trust’s failure to include in its reporting a material quantity of past due loans, despite the reporting requirements and knowing the significance of past due loan volume to investors and regulators. Mr. North, as the bank’s chief credit officer, approved the exclusion or “waiver” of such loans from internal reports that he knew would be used to generate the bank’s external financial reports.

As the bank’s president and head of regional banking, Mr. Harra allegedly encouraged the “waiver” of past due loans. He served as a primary point of contact with the bank’s regulators during 2009 and 2010, signed bank regulatory filings, participated in quarterly earnings calls with investors, and did not disclose the bank’s failure to report “waived” loans.

The chief financial officer, Mr. Gibson, allegedly also knew the bank had “waived” loans from public reporting and failed to disclose this. Despite this knowledge, he allegedly helped to draft and approved SEC filings and certified that those same filings fairly presented the financial condition of Wilmington Trust.

The U.S. Attorney’s office claims Mr. Rakowski, as controller, approved the bank’s filings with the SEC and the Federal Reserve knowing that those reports did not include past due loans that had been “waived.”

In November 2010, Wilmington Trust was acquired by another bank at a discount of approximately 46 percent from the bank’s share price the prior trading day.

In announcing the superseding indictment, U.S. Attorney for the District of Delaware Charles M. Oberly III, said,

“This superseding indictment marks the next significant step in our investigation into the illegal conduct by at Wilmington Trust. The failure by these individuals to properly inform regulators and investors about the true financial condition of Wilmington Trust resulted in significant harm to those investors and losses to the Delaware community. As high-ranking bank executives, these individuals had an obligation to accurately report important financial metrics which enable investors to make informed decisions. Even in the wake of the financial crisis, their deception was neither permissible nor excusable.”

“The deception explained in this indictment shows the defendants set out to hide information from the federal government,” said acting Special Agent in Charge Scott Hinckley of the FBI in Delaware. “The men and women named in this case not only hid financial details from regulators but from the general public and investors.
“These aren’t victimless crimes and those who committed them will be held accountable.”

The case is being investigated by the FBI, the Department of Treasury’s Special Inspector General for the Troubled Asset Relief Program, the Internal Revenue Service’s Criminal Investigative Division and the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau.

The Securities and Exchange Commission also has contributed to the investigation. The case is being prosecuted by Assistant U.S. Attorneys Robert Kravetz and Lesley Wolf of the District of Delaware.

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