Following a multi-week trial, a CEO, three senior executives and a favored borrower were convicted Friday by a federal jury in Virginia in a fraud scheme that led to the collapse of the Bank of the Commonwealth.
The men were able to hide non-performing assets at the bank, causing it to fail in 2011. The failure cost the Federal Deposit Insurance Corporation about $268 million.
Christy Romero, Special Inspector General for the Troubled Asset Relief Program, said the co-conspirators "cultivated a culture of deceit and corruption at the bank," and that their assumption the taxpayers and the community would clean up their mess was both "legally and morally offensive."
Edward J. Woodard, 70, was the chief executive officer and chairman of the board until he was forced out in December 2010. He was convicted of conspiracy to commit bank fraud, bank fraud, false entry in a bank record, unlawful participation in a loan, and false statement to a financial institution.
Woodard's son, Troy Brandon Woodard, 36, was employed by a subsidiary of the bank until his firing in January 2011. His convictions were for conspiracy to commit bank fraud and unlawful participation in a loan.
Stephen G. Fields, 49, who was convicted of conspiracy to commit bank fraud, false entry in a bank record, false statement to a financial institution, and misapplication of bank funds, was an executive vice president and commercial loan officer until he was fired in December 2010.
Dwight A. Etheridge, 48, was favored borrower who was convicted of conspiracy to commit bank fraud, misapplication of bank funds, and false statement to a financial institution.
All of those convicted in the case will be sentenced in mid-September and each charge carries a maximum sentence of 30 years in prison.
Simon Hounslow, 48, an executive vice president and chief lending officer until the bank's closure in 2011, was acquitted of all charges.
In 2006, the bank's leaders successfully expanded outside of Norfolk and Virginia Beach to northeastern North Carolina and the Outer Banks.
In 2008, too many troubled loans and foreclosed real estate were causing the financial condition of the bank to quickly deteriorate. However, the bank executives were able to cover up the bank's condition and go about business as normal in an effort to keep investor and customer confidence strong.
In November 2008, the Bank of the Commonwealth submitted to the Federal Reserve an application for approximately $28 million from the Troubled Asset Relief Program. However, the Federal Reserve expressed concerns about the bank's financial situation, and the bank to withdraw the application.
The bank's assets eventually reached $1.3 billion by December 2009. However, the assets were built up behind a scheme of brokering deposits and giving preferential treatment to troubled borrowers.
Between 2008 and 2011, the bank lost nearly $115 million, according to the press release. The bank's failure cost the federal government approximate $268 million.
Kelly Cohen is a member of The Washington Examiner Watchdog reporting team. She can be reached at email@example.com.