Reginald R. Harper, 59, Hammond, Louisiana, and Troy A. Fouquet, 45, Covington, Louisiana, were sentenced by U.S. District Judge Nannette Jolivette Brown for conspiracy to commit bank fraud. Harper was sentenced to 24 months imprisonment, followed by 3 years of supervised release, and a $25,000 fine. Fouquet was sentenced to 18 months imprisonment, followed by 3 years of supervised release. Harper and Fouquet were also ordered to pay restitution to the victim of their crime, First Community Bank, in the amount of $570,955.71 plus interest.
As previously reported by Mortgage Fraud Blog, in approximately 2004, Harper, the former President and Chief Executive Officer of First Community Bank, loaned in excess of $2 million to co-defendant Fouquet, a local real estate developer, or one of a number of companies owned or controlled by Fouquet. The purpose of the loans were to purchase parcels of real estate; develop them into subdivisions; and build houses on them, eventually to be bought by prospective home buyers, who would obtain permanent mortgages to finance the purchase. The permanent mortgages would pay off the original loans made by Harper on behalf of First Community Bank and also include monies to pay Fouquet.
According to the court documents, however, beginning in 2005, it became difficult for Harper and Fouquet to identify qualified home buyers to obtain permanent mortgages. As a result, Harper and Fouquet developed various methods to avoid reporting the delinquency on the loans made by Harper, on behalf of First Community Bank, to Fouquet and/or his companies. One method used by the defendants, according to court documents, included Harper making loans to the prospective home buyers to make it appear to the permanent mortgage lender they were trying to qualify that the prospective home buyer had more funds on hand than they actually did.
Another method employed by the defendants, according to court documents, was to use nominee loans or straw borrowers to sign up for new First Community Bank loans, authorized by Harper, the proceeds of which were then utilized to pay off the original loans made to Fouquet and/or his companies. Finally, another method used by the defendants to avoid reporting the delinquency of these loans, according to court documents, included Fouquet presenting Harper with insufficient checks (i.e. a check not backed up with sufficient funds) and Harper accepting them, crediting the loan payment in First Community Bank‘s books and records, despite knowing the check was insufficient.
The fraudulent methods employed by the defendants, as set forth in court documents, led to a false call report (a report of First Community Bank‘s financial health), which impacted an application undertaken by the bank to receive funds from the Troubled Asset Relief Program (TARP), a program administered by the United States. Ultimately, according to court documents, when the wrongdoing employed by the defendants was uncovered, First Community Bank suffered severe financial losses.
U.S. Attorney Dana J. Boente announced the sentences.
The case was investigated by agents from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and agents from the Federal Bureau of Investigation.
The case was prosecuted by Assistant U. S. Attorney Matt Chester.
“Bank fraud harms financial institutions, in this case First Community Bank, and the local economy,” said United States Attorney Boente. “This prosecution provides a lesson that bank fraud has serious consequences, not just for financial institutions, but also for individuals.”
“First Community Bank President Harper and bank customer Fouquet turned to bank fraud to hide past due loans from the bank, its regulators, and the Treasury Department in the bank’s TARP application,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “The million dollar fraud scheme, which involved making sham loans to Fouquet through straw borrowers and a cover-up that lasted for years, caused significant losses to First Community Bank and jeopardized the bank’s financial stability and ability to serve its community. SIGTARP and its law enforcement partners will bring accountability for TARP-related crimes.”
“The FBI was very pleased to join forces with SIGTARP in partnership with the United States Attorney’s Office to root out quite substantial TARP-related fraud in the financial community,” stated Mike Anderson, Special Agent in Charge of the Federal Bureau of Investigation, New Orleans Division.