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Banker Shaun Hayes Sentenced to Five Years and Eight Months in Federal Prison

Hayes pled guilty to participating in a scheme to defraud Excel Bank and to profit from illegal insider loans

Our top law enforcement priority is unlawful conduct by any of the 130 banks and other financial institutions who Treasury has already paid billions or millions of TARP dollars in HAMP. This critical law enforcement is necessary to bring justice and safeguard the $9 billion Treasury is committed or obligated to pay in the future.

- 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
Former CEO and Chairman Edward Woodard orchestrated a massive fraud that drove the bank into the ground. Greedy for aggressive growth, he made risky loans. When the loans resulted in losses, bank officers cooked the books to hide $800 million in past due loans, overdrew checking accounts by $100,000 to make loan payments, and made loans to straw borrowers knowing that the money would pay down delinquent borrowers' loans.

SIGTARP's Role
Bank of the Commonwealth applied for $28 million in TARP funds using false books and records. SIGTARP's investigation with our law enforcement partners uncovered the massive fraud. Former U.S. Attorney Neil MacBride, who prosecuted the case, said that the fraud "intensified the impact of the 2008 financial crisis."

Investigation Fact
This bank failure, the largest in Virginia history, was also at the time the seventh largest bank failure.

The Outcome
Woodard was sentenced to 23 years in prison, former Executive Vice President Stephen Fields was sentenced to 17 years in prison, and Vice President Troy Brandon Woodard was sentenced to eight years in prison. This and similar SIGTARP cases have brought accountability to senior bankers who tried to get taxpayer funds to cover up losses created by risky lending.


The Misconduct
Jefferies and RBS 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
At Jefferies, members of management in the fixed income division were aware of the misrepresentations but did nothing to stop it. At RBS, supervisors and compliance personnel then took steps to prevent victims and honest RBS employees from discovering and exposing the scheme.

The Outcome
Jefferies and RBS agreed to $25 million and $35 million penalties, respectively, and made changes to staffing and its compliance policies, procedures, and internal controls. Other broker dealers made similar changes.


The Misconduct
SunTrust's 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
Former Taylor, Bean & Whitaker (TBW) Chairman Lee Bentley Farkas spearheaded an undetected decade long $2.9 billion fraud scheme that ultimately contributed to the failure of the mortgage lender and Colonial Bank. Facing mounting losses at TBW, Farkas and his co-conspirators hid them by secretly overdrawing the firm's accounts with Colonial Bank. During the fraud, Farkas lived in the lap of luxury using the more than $38 million that he stole from TBW and Colonial Bank - buying a jet, expensive antique and collector cars including a Rolls Royce, and multiple vacation homes.

SIGTARP's Role
This 10-year fraud was undetected until Colonial Bank applied for TARP and SIGTARP discovered the fraud.

Investigation Fact
The fraud contributed to the failure of Colonial Bank, one of the 25 largest banks in the nation with $25 billion in assets, the third largest bank failure since the crisis, and the sixth largest bank failure in U.S. history, as well as the failure of TBW which was one of the largest mortgage lenders in the nation.

The Outcome
SIGTARP saved $553 million in TARP funds that Treasury had already approved to invest in the bank. Eight defendants were sentenced to prison, including Farkas and former Colonial Bank Senior Vice President Catherine Kissick; they received 30 and eight year sentences, respectively.

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