Developer Admits To Working with Bank Executives to Defraud First NBC Bank Out Of Over $123 Million
NEW ORLEANS – The United States Attorney’s Office announced that GARY R. GIBBS (“GIBBS”), age 66, a resident of Niceville, Florida, pled guilty today to conspiracy to defraud First NBC Bank, the New Orleans-based bank that failed in April 2017.
According to court documents, from in or around 2010 through April 2017, GIBBS had a banking relationship with First NBC Bank, individually and through various corporate entities he controlled. During that time, GIBBS and his entities were regularly unable to pay existing loans or overdrafts on First NBC Bank accounts. Bank President Ashton Ryan Jr., Chief Credit Officer William Burnell, and Executive Vice President Robert Calloway, who were all charged on July 10 in a 46-count indictment, disguised GIBBS’s and his entities’ true financial condition by making new loans to pay GIBBS’s existing loans and to cover his overdrafts. They falsely stated in loan documents that GIBBS was able to pay his loans with cash generated by his businesses, and they hid from the First NBC Bank Board of Directors, auditors, and examiners that GIBBS was only making his existing loan payments by getting new loans from First NBC Bank. Ryan, Burnell, and Calloway hid the fact that they actually made loans to GIBBS to keep him and his entities off of month-end reports to the Board, auditors, and examiners. These month-end reports listed borrowers who were not paying their loans or whose accounts were overdrawn. By keeping GIBBS and his entities off of those reports, Ryan, Burnell, and Calloway were able to hide their scheme to keep lending to GIBBS despite his inability to pay his loans.
When GIBBS told Ryan and Calloway that he was considering filing bankruptcy or not paying his loans, Ryan told GIBBS that First NBC Bank could not afford for GIBBS to default on the loans. After that, Ryan, Burnell, and Calloway continued to make false statements and material omissions in loan documents to hide from the Board, auditors, and examiners that the purpose of the new loans was to keep GIBBS and his entities from defaulting and that, in reality, GIBBS was not able to make his payments to the bank without receiving proceeds from new loans. Neither Ryan nor Calloway ever disclosed to the Board, auditors, or examiners that GIBBS was considering defaulting on his loans or filing bankruptcy, because that would have revealed that GIBBS did not generate enough cash to pay his loans.
To hide their scheme, Ryan directed GIBBS to inflate certain financial statements that GIBBS provided to First NBC Bank, by falsely increasing the income of GIBBS’s entities to hide the amount of money these entities were losing. Ryan did not tell the Board, auditors, or examiners that GIBBS inflated his financial statements at Ryan’s direction. Calloway also made false statements to First NBC Bank’s external auditors about GIBBS and his loans. By the time First NBC Bank failed in April of 2017, GIBBS and his entities owed the bank over $123 million.
“Today’s guilty plea demonstrates the FDIC OIG and our law enforcement partners will not tolerate criminals who defraud our insured financial institutions and cause harm to the nation’s banking industry,” said Laurie Younger, Special Agent in Charge, Dallas Region, Office of Inspector General for the Federal Deposit Insurance Corporation.
“The FBI and our law enforcement partners have dedicated significant time and resources toward investigating the failure of FNBC, which resulted in nearly a billion dollar loss to the FDIC. This guilty plea should be a deterrent to others who would attempt to manipulate the nation's banking system,” said Bryan Vorndran, FBI New Orleans Special Agent in Charge.
“We are committed to working with our law enforcement partners in holding accountable wrongdoers whose fraudulent actions materially impact financial institutions regulated and supervised by the Federal Reserve Board,” said Stephen Donnelly, Acting Special Agent in Charge, Eastern Region, Office of Inspector General for the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
GIBBS pled guilty to one count of conspiracy to commit bank fraud, in violation of Title 18, United States Code, Sections 1344 and 1349. The maximum penalties that may be imposed at sentencing are thirty years in prison; a fine of the greater of twice the gain to GIBBS or twice the loss to any victim; and up to five years of supervised release.
Judge Jane Triche Milazzo set GIBBS’s sentencing for December 2, 2020.
This case is being investigated by the Federal Bureau of Investigation; the Federal Deposit Insurance Corporation, Office of Inspector General; and the Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Office of Inspector General. Assistant U.S. Attorneys Sharan E. Lieberman, Nicholas D. Moses, Matthew R. Payne, and J. Ryan McLaren are in charge of the prosecution.
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