Paul Harold Doughty, 66, Edmond, Oklahoma, and Fred Don Anderson, 66, Eagle Point, Oregon, have been indicted and charged with bank fraud, conspiracy to commit bank fraud, false statements to banks, and misapplication of bank funds in connection with First State Bank of Altus and various loan schemes.
Doughty was the former president and chairman of First State Bank of Altus (“FSB“). Anderson partnered with Doughty in several businesses headquartered in Altus. In July 2009, state banking regulators closed FSB due to the bank’s loan losses, and the Federal Deposit Insurance Corporation was appointed as the bank’s receiver.
The counts against Doughty and Anderson charge fraud related to three alleged loan schemes: (1) a series of FSB loans to finance a real estate development in Routt County, Colorado; (2) a series of “senior life settlement loans” from FSB to support an Altus aerospace company; and (3) a $2 million unauthorized loan from FSB to a company under Doughty and Anderson’s control.
According to the Indictment, in 2006 and 2007 Doughty and Anderson recruited buyers for 19 Colorado real estate lots priced at approximately $700,000 each. The indictment alleges that Doughty approved and issued 14 loans to buyers, totaling more than $10,000,000.00 in loan proceeds for the seller, Mountain Adventure Property Investments, LLC (“MAPI”). MAPI was a Colorado company that Anderson had an indirect ownership interest in and where he served as president and manager. It is alleged that each loan exceeded Doughty’s individual lending authority, and most of the loans were issued without FSB loan committee or board approval, including a $580,000.00 loan to Anderson’s personal company. The indictment alleges that most lot sales were presented to buyers as “zero money down” investments, and that the earnest money for the purchases was either advanced or refunded to many of the buyers by Anderson on behalf of MAPI. Doughty and Anderson also assured the buyers that MAPI would make all payments on the loans to the bank. It is alleged that on the few occasions when Doughty presented a Colorado loan to FSB’s loan committee, he misrepresented the source and amount of borrowers’ down payments and the borrowers’ responsibility for making payment on the loans. The indictment includes eight counts for conspiracy, bank fraud, unauthorized issuance of a loan, and false statements related to the Colorado lot loans from FSB.
The indictment also alleges Doughty made false statements to Vectra Bank in Colorado in applying for his own loan to purchase a Colorado lot from MAPI. In his loan application, Doughty omitted his earlier $580,000.00 loan from a different bank and also represented to Vectra Bank that his down payment on the new lot was not borrowed. According to the indictment, Doughty planned to be reimbursed by Anderson from MAPI, the seller, for his entire down payment.
Second, the indictment charges Doughty and Anderson in connection with five $2.5 million individual loans taken out by FSB borrowers in 2008 in so-called “senior life settlement” loans. According to the indictment, Doughty and Anderson recruited borrowers to take out these “self-paying” loans to provide money for investments in Altus-based Quartz Mountain Aerospace, Inc. (“QMA”). It is alleged that a portion of the loan proceeds was invested in QMA, and another portion would pay the loan’s interest. It is also alleged that the remaining proceeds on the loans would buy and maintain third-party life insurance policies, where the death benefits on the third parties were intended to repay the loan’s principal. The indictment alleges that each loan exceeded Doughty’s lending authority, and he issued senior life settlement loans without FSB’s loan committee or board approval. According to the indictment, Doughty and Anderson funneled $125,000.00 in “service fees” to their shared company, Altus Ventures, from each loan. This service fee was not disclosed to FSB. The indictment charges Doughty and Anderson with false statements, unauthorized issuance of a loan, and misapplication of bank funds with the senior life settlement loans, including a $2.5 million loan issued to Anderson’s personal company.
Third, the indictment alleges that in January 2008, Doughty and Anderson arranged a $2 million loan from FSB to Ethanol Products Group, LLC (“EPG”), a startup company in which both Anderson and Doughty had an ownership interest. It is alleged that Doughty advanced the $2 million from FSB, above his individual lending authority, without approval by FSB’s loan committee or board. The indictment alleges that soon before issuing the loan, Doughty e-mailed Anderson his “cash strategy” for two of the other companies they controlled; the “strategy” showed all EPG loan proceeds would be directed to companies controlled by Anderson and Doughty, ultimately diverting $100,000.00 in “officer bonuses” to Anderson and Doughty. The indictment charges Doughty with unauthorized issuance of a loan and misapplication of bank funds, and Anderson is charged with participation in an unauthorized loan in relation to the EPG loan.
The indictment was unsealed after Anderson was recently arrested and had his initial appearance on the charges in Eugene, Oregon. Anderson’s arraignment in Oklahoma City federal court has been set for June 10, 2015. The arraignment for Doughty is set for June 5, 2015, in Oklahoma City federal court.
For each of the fifteen counts in the indictment, the charged defendant faces up to thirty years in prison and a fine of $1,000,000.00. Under federal law, each defendant would be required to pay restitution to victims. Furthermore, the indictment seeks forfeiture from each defendant in the amount of the proceeds of the fraudulent schemes and in the amount of the property involved in the offenses.
Sanford C. Coats, United States Attorney for the Western District of Oklahoma, announced the charges.
These charges are the result of an investigation conducted by the Federal Bureau of Investigation and the Federal Deposit Insurance Corporation – Office of Inspector General. The case is being prosecuted by Assistant U.S. Attorneys Chris M. Stephens and K. McKenzie Anderson.