Developer Charged With Conspiracy 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, was charged today with conspiracy to defraud First NBC Bank, the New Orleans-based bank that failed in April 2017.
According to the Bill of Information, 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 A, Bank Officer B, and Bank Officer C 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. Bank President A, Bank Officer B, and Bank Officer C 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, Bank President A, Bank Officer B, and Bank Officer C were able to hide their scheme to keep lending to GIBBS despite his inability to pay his loans.
When GIBBS told Bank President A and Bank Officer C that he was considering filing bankruptcy or not paying his loans, Bank President A told GIBBS that First NBC Bank could not afford for GIBBS to default on the loans. After that, Bank President A and Bank Officer C 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 Bank President A nor Bank Officer C 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, Bank President A 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. Bank President A did not tell the Board, auditors, or examiners that GIBBS inflated his financial statements at Bank President A’s direction. Bank Officer C also made false statements to First NBC Bank’s external auditors about GIBBS and the GIBBS loans. By the time First NBC Bank failed in April of 2017, GIBBS and his entities owed the bank over $123 million.
GIBBS is charged in the Bill of Information with 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 upon conviction are thirty years in prison; a fine of $250,000, or the greater of twice the gain to GIBBS or twice the loss to any victim; up to five years of supervised release; and a $100 mandatory special assessment.
The United States Attorney’s Office stated that a Bill of Information is merely an accusation and that the guilt of the defendant must be proven beyond a reasonable doubt.
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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