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Former Vice President at Two TARP Banks Sentenced to 78 Months in Federal Prison for Fraud and Identity Theft

A former TARP banker was sentenced to 78 months in prison today for a fraud and identity theft scheme that caused more than $3.2 million in losses.

Our top law enforcement priorities are to bring justice to bankers who commit fraud at banks where taxpayers lost money and to root out bid-rigging, fraud and public corruption in the blight demolition program

- Special Inspector General Goldsmith Romero

SIGTARP uses an analytical, experienced-based approach to identify and investigate crime at financial institutions where TARP funds were lost. While bank self-reporting often initiates law enforcement investigations, it is not effective in identifying fraud where executives hide a bank's poor financial condition: that would require executives to self-report their crimes. Instead, SIGTARP uses its fraud expertise to analyze bank information compared to red flags developed from our investigations. Each of the red flags may seem inconsequential on their own but often uncovers crime that has remained hidden for years.

We use a similar method to proactively identify crime in the $811 million blight demolition program, part of the Hardest Hit Fund.

Our special agents have the authority to search, seize, and arrest. When they and our investigative attorneys, analysts and forensic agents build a strong case against an individual or financial institution, SIGTARP then works with the Justice Department and other prosecutors to take the case to trial or secure a guilty plea.

Notable Investigations

The Misconduct
After aggressive and risky loan-fueled growth, management of TARP recipient United Commercial Bank (UCB) fraudulently inflated the bank's financial performance by hundreds of millions of dollars. This crime led to one of the largest bank failures since the Great Depression and the loss of $300 million in TARP funds.

SIGTARP's Role
Instead of relying on traditional notions of bank fraud, SIGTARP compared UCB's bank information to red flags we developed. This approach helped identify the hidden crime.

Investigation Fact
Electronics stored in a warehouse that served as collateral for a major loan turned out to be fake-staged like a Hollywood movie set. But UCB did not write the loan down.

The Outcome
UCB's former chief credit officer was sentenced to eight years in prison and ordered to repay $298 million to TARP. The former chief financial officer and former vice president were also convicted.

This case and others - including Colonial Bank, Bank of Commonwealth, and TierOne Bank - have brought accountability to senior bankers who tried to get taxpayer funds to cover up losses created by risky lending.


The Misconduct
TARP recipient General Motors (GM) knew about an ignition switch defect that lead to driver deaths but concealed it for years from consumers and regulators.

SIGTARP's Role
SIGTARP played a lead role in finding the criminal conduct through interviews of 70 witnesses and analysis of millions of pages of documents and emails.

Investigation Fact
GM could have corrected the ignition switch defect for less than one dollar per vehicle but chose not to because of the cost.

The Outcome
GM admitted to the criminal conduct and changed corporate practices. It also paid $900 million to the U.S. government, helping offset a TARP loss of $11 billion.

GM's federal regulator changed its practices and auto manufacturers now respond more quickly respond to defects. Vehicle recalls have skyrocketed from 20 million in 2013 to more than 50 million in 2014 and 2015.


The Misconduct
SunTrust' bungled administration of the Home Affordable Modification Program (HAMP) caused serious financial harm to thousands of homeowners who applied through the bank. SunTrust made material misrepresentations to homeowners applying for lower interest rates. It failed to process applications in a timely fashion. And it made mass denials and then lied to Treasury about the reason why applicants were denied.

SIGTARP's Role
SIGTARP's investigation helped uncover the criminal conduct. We found that while HAMP was designed to be a beacon of hope and opportunity for homeowners in dire straits, SunTrust was unwilling to put resources in HAMP despite taking billions in TARP funds.

Investigation Fact
The floor of the room in which SunTrust dumped the voluminous unopened HAMP applications actually buckled under the packages' sheer weight.

The Outcome
SunTrust agreed to pay $320 million; borrowers damaged by the bank's conduct and housing non-profits are among the beneficiaries. The bank also made significant corporate changes.


The Misconduct
Jefferies fraudulently increased the profitability of residential mortgage backed securities (RMBS) trades by repeatedly misleading customers, including the TARP-funded Public-Private Investment Program, a $18.6 billion effort designed to unlock frozen credit markets during the crisis.

SIGTARP's Role
SIGTARP played a lead role uncovering the misrepresentations and leveraged its expertise to identify that many of these toxic securities were traded in the Public-Private Investment Program.

Investigation Fact
Members of Jefferies' management in the fixed income division were aware of the misrepresentations but did nothing to stop it.

The Outcome
Jefferies agreed to a $25 million penalty and made changes to staffing and its compliance policies, procedures, and internal controls; other broker dealers changed their sales tactics. SIGTARP's investigations have also resulted in several individual traders across the industry being criminally charged with securities fraud related to the Public-Private Investment Program.

The fraud SIGTARP's investigations uncovers reduces banks' ability to lend through a vicious cycle: the fraud causes losses, bank capital is reduced, and less money flows to local businesses and communities

- Special Inspector General Goldsmith Romero

Bringing Accountability to the Insulated CEO

Goldsmith Romero Interview

Executives from medium and small banks have been successfully prosecuted and sentenced to prison for committing crimes. But not big bank executives, who are purposely insulated from knowing about wrongdoing. Special Inspector General Goldsmith Romero proposes a crime and fraud certification to help fix that problem.

Goldsmith Romero Interview

Special Inspector General Goldsmith Romero speaks with CNBC about the proposal

Banks Image

The New York Times profiles SIGTARP's success investigating medium and small banks

SIGTARP by the Numbers

SIGTARP By The Numbers Infographic