Two Former Will County Bank Officials Sentenced In Concealing Loan Delinquencies Of Two Customers Causing $1.1 Million Loss
CHICAGO — A former director and a former officer of First Community Bank and Trust in Will County were sentenced for fraudulently making false entries in the bank’s records which generated reports falsely representing that loans were current, when, in fact they were delinquent. MARTIN E. SCHMIDT, JR., 56, of Beecher, was sentenced to 8 months of imprisonment by U.S. District Court Judge Charles Kocoras. DONNA M. BARBER, 53, also of Beecher, was sentenced by U.S. District Court Judge Jorge L. Alonso to one year of supervised release, with the first six months to be served as home confinement. Schmidt and Barber were ordered to pay restitution in the amounts of $1,183,374 and $684,938, respectively. Schmidt must report to the Bureau of Prisons on June 2, 2015. As a result of their convictions, both defendants are also barred from associating with or being employed by a financial institution for ten years.
The defendants together concealed that loans totaling approximately $2.8 million where delinquent, and caused the bank to lose more than $1.1 million. Schmidt was senior vice president for lending and a member of the board of directors of First Community Bank and Trust, which operates in Beecher and Peotone, and co-defendant Barber was vice president for mortgage lending.
Schmidt and Barber were charged together in October 2014 in a criminal information with making false bank reports with intent to defraud. Schmidt pled guilty in November 2014, and Barber pled guilty in December 2014.
“Both defendants were long-time trusted employees of the bank,” argued Assistant U.S. Attorney Brian P. Netols in the government’s sentencing memoranda, “In committing the offense, [they] repeatedly betrayed and violated that trust.”
Schmidt and Barber admitted that they caused and made false entries in the bank’s past due accounts report for September 2009 by intentionally omitting to disclose as past due two customers’ loans and advances in the total principal amount of approximately $2.5 million.
According to court documents, Schmidt was the point of contact for Customer K, and Barber was the point of contact for Customer M, and their compensation was based, in part, on the performance of the loans for which they were each responsible. By September 2008, Schmidt and Barber each knew that Customers K and M were unable to make payments to the bank on their various loans. They agreed that they needed to take action to prevent the delinquent accounts from appearing on the bank’s reports and began concealing their past due nature. The false entries extended from September 2008 until October 2009.
Barber, with Schmidt’s knowledge and approval, and Schmidt made and caused false entries in loan records allowing Customer M to skip payments without paying the interest due and extending notes without interest payments being current. Some false entries were made on a retroactive basis so the actual condition of the loans would not appear on the bank’s current monthly records. With these serious delinquencies concealed, the bank made additional loans to Customer M totaling $708,274, on which he subsequently defaulted.
At Schmidt’s request, Barber also made false entries in the Bank’s records relating to Customer K which allowed loan payments to be improperly skipped and overrode restrictions on additional advances. Schmidt then approved $269,038 in loans to Customer K after Schmidt knew that Customer K was then unable to repay. Schmidt also made unauthorized undocumented advances to Customer K totaling $105,562, paid $22,500 of Customer K’s overdrafts, and issued an unauthorized letter of credit to Customer K in the amount of $80,000.
Finally, Schmidt deceived the bank’s board of directors by leading them to believe that he and Barber were properly managing the bank’s loans, when they were actually fraudulently creating reports that made it appear that the loan portfolio was in better shape than it was.
The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.