United States Attorney Richard B. Roper
Northern District of Texas

FORMER FIRST NATIONAL BANK BOARD MEMBER / BANK OFFICER
SENTENCED TO FEDERAL PRISON

LUBBOCK, Tx. — Walter Charles Cleveland was sentenced today by U.S. District Judge Sam R. Cummings to six months and ordered to pay $125,000 restitution, announced U.S. Attorney Richard B. Roper of the Northern District of Texas. Cleveland pled guilty in May to one count of misprision of a felony. Judge Cummings ordered that Cleveland, 43, surrender to the Bureau of Prisons on October 5, 2007.

Walter Charles Cleveland was a member of the Board of Directors and on the Board of Directors Loan Committee at First National Bank (FNB) in Lubbock, Texas. He was also Vice-President at FNB. Johnny Bob Carruth, who has previously been convicted in the Lubbock Division of the Northern District of Texas of conspiracy to commit bank fraud, was also a member of the Board of Directors and on the Board of Directors Loan Committee at FNB. Carruth was sentenced in October 2006 to 14 months in prison and ordered to pay $142,000 restitution.

From October 2000 to March 2003, Carruth was involved in the purchase of stock in several entities which resulted in a scheme to defraud FNB. In October 2000, Cleveland agreed and joined with Carruth to purchase shares of stock in CommunicateNow.com (CNC). Cleveland agreed to purchase 175,000 shares in CNC, and Carruth was to purchase 125,000 shares. Cleveland paid for the stock with two checks, one for $50,000.00 and the other for $125,000. Cleveland didn’t have the money to pay for the stock, so he postdated the two checks to January 15, 2001. Carruth didn’t have the money either to purchase the stock, so he also wrote a postdated check to CNC for $125,000.

Cleveland and Carruth purportedly had some cattle that would have been sold in mid- January 2001. The proceeds from the sale of the cattle would be used to cover the postdated checks.

On December 5, 2000, CNC bought a one year, $100,000 Certificate of Deposit (CD) at FNB. FNB holds the CD.

On December 29, 2000, the President and Secretary of CNC, David Hancock, applied for two loans for “personal expenses,” one in the amount of $175,000, and the other for $150,000. Cleveland was the loan officer on the two loans. Each of these loans was secured by the $100,000 FNB CD and CNC shares. The loans were funded and the loan proceeds were deposited on December 29, 2000.

On December 29, 2000, David Hancock, opened a CNC business checking account with the loan proceeds from these loans. CNC used these loan proceeds to fund the postdated (and uncashed) checks written by Cleveland and Carruth.

Approximately two weeks later, in accordance with Hancock’s instructions, Cleveland released the CD held as collateral on the loans and wired the proceeds to the CNC operating account at Bank One. Cleveland did not require that the CD be applied to the loans.

Cleveland and Carruth released the collateral in order to benefit CNC in starting its business. This action directly benefitted Cleveland and Carruth as stockholders in CNC. Cleveland took these actions as a member of the Board of Directors and as Vice-President of FNB.

U.S. Attorney Roper praised the investigative efforts of the Internal Revenue Service - Criminal Investigation and Federal Bureau of Investigation. The case was prosecuted by Assistant U.S. Attorney Paulina Jacobo of the Lubbock, Texas, U.S. Attorney’s Office.

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