Former Wilmington Trust executives overturned fraud convictions
A federal appeals court overturned the historic criminal fraud convictions of four former senior Wilmington Trust executives.
The four men faced jail time following their 2018 convictions by a Wilmington federal court on charges relating to the cover-up of bad debts from investors and regulators during the financial collapse of the banking institution in Wilmington. Wilmington.
The notice overturning the conviction, issued Tuesday morning, could pave the way for another criminal trial if federal prosecutors in Wilmington decide to prosecute the former leaders. Prosecutors can also appeal Tuesday’s decision to the United States Supreme Court.
In a written statement, US Attorney David Weiss, whose office has continued the charges, said he was “disappointed with the outcome.” He has not made a commitment to appeal the decision or retry the defendants and said his office is weighing his options.
The successful call is last chapter of the fall of the once venerable institution of Wilmington.
Two years ago, a Delaware jury found former Wilmington Trust chairman Robert Harra Jr., former CFO David Gibson, former credit manager William North and former controller Kevyn Rakowski guilty of bank fraud and conspiracy.
A host of Delaware’s elites – including former governors. Jack Markell and Mike Castle writing on behalf of Harra – wrote the judge, pleading that he would save the financiers time in prison.
But in December 2019, Harra and Gibson were sentenced to six years in prison. North was sentenced to four and a half years and Rakowski received three years for the convictions.
Richard G. Andrews, the federal judge who presided over the trial, granted the four leaders a suspension of their prison terms pending their appeals.
Prosecutors said the crimes led to the downfall of the once iconic and independent Bank of Delaware. In 2011, the bank’s assets and name were swallowed up by M&T Bank in a discount sale, depriving billions of shareholders and leaving hundreds of people in Delaware without jobs.
Prosecutors told jurors the former executives caused the collapse by conspiring to withhold information from regulators and investors about the bank’s true financial position from 2008.
They alleged that Wilmington Trust was keeping “a second set of books”, separate from those they disclosed to regulators, showing the true value of a deteriorating commercial real estate portfolio. In an internal email, referenced in court documents, a Wilmington Trust banker called the damaged assets “credit dung”.
Specific to federal crimes, bankers have been accused of withdrawing hundreds of millions of dollars in overdue loans from mandatory “overdue” reports to federal regulators.
Much of these loans went to developers in southern Delaware, taking advantage of the region’s rapid growth before the Great Recession.
The issue at trial – and again on appeal – was exactly how prosecutors and the jury should define “overdue.”
Prosecutors argued that the term was clearly defined in U.S. Securities and Exchange Commission documents and should have been made clear to bankers in 2010 before they demanded $ 287 million from investors as the bank was on the verge of collapse.
Defense lawyers representing the bankers said the term was ambiguous, contained different definitions relating to banking law, and that bankers’ actions were an accepted practice, not an illegal one.
As part of the trial, Justice Andrews accepted prosecutors ‘interpretation of the definition and dismissed defense lawyers’ requests to present evidence or instruct the jury on other interpretations of the term.
Cheryl Ann Krause, the appeals judge who drafted Tuesday’s decision, wrote that the government must prove either that its interpretation of the overdue reporting requirement is the only “objectively reasonable” interpretation or that the declaration of the defendants was also false in an objectively reasonable alternative. interpretation.
“Because the government here has produced insufficient evidence from which a rational jury could find the defendants ‘statements false under this rule, we will overturn the defendants’ false statements convictions,” Krause wrote.
The bankers were convicted of charges including misrepresenting federal regulators, securities fraud and conspiracy.
The ruling essentially changes convictions for misrepresentation to acquittals, but gives federal prosecutors the option to re-prosecute certain securities fraud and conspiracy charges.
In a written statement, attorney Mike Kelly, who represented Harra, said he did not understand why the case was initiated.
“This case was an incredible waste of taxpayer money that literally ruined the lives of four innocent people,” Kelly said. “Rob and his family have endured nothing less than a nightmare for almost 10 years now.”
Lawyer Henry Klingeman, who represented Rakowski, said his client was satisfied but the “personal toll” of the process was “incalculable”.
“She did not commit any crime and it is never the fault of the defendants that the bank fought,” Klingeman wrote. “The court’s decision is a justification. “