James E. Bishop, 70, Mount Vernon, Washington, former Chairman and CEO of Summit Bank, a Skagit County community bank, pleaded guilty in U.S. District Court to making a false entry in a report of an insured bank.
In his plea agreement, Bishop admits that between 2009 and 2011, Bishop and his son, who was the bank president, concealed from regulators the mounting number of loans that were in default. Summit Bank was ultimately closed by state regulators and sold in May 2011. Under the terms of the plea agreement, Bishop must be sentenced to a term of imprisonment between 12 and 41 months or both sides can withdraw from the plea agreement. Sentencing is scheduled before Chief U.S. District Judge Marsha J. Pechman on November 15, 2013.
According to the records filed in the case, in 2005 James E. Bishop became CEO of Summit Bank and chairman of Summit Bank’s Board of Directors. His son, James E. Bishop, II, served as president of the bank, and both were significant shareholders in the bank. James E. Bishop, II has also been charged in the case. The younger Bishop served as president of Summit Bank from 2005-2011.
According to the statement of facts in the plea agreement, the bank was required to file various reports with the Federal Deposit Insurance Corporation (FDIC) disclosing the loans the bank had made and the status of the loans. In his plea agreement, Bishop admits that between 2009 and 2011, he caused the bank to undertake financial transactions related to past due loans, which concealed the overdue loans in the quarterly reports that went to the FDIC, essentially hiding millions of dollars in loans that were past due and causing the bank to appear financially healthier than it actually was. For example, in one report on June 30, 2010, the bank reported past due loans of approximately $6 million in outstanding loans, payments on which were past due for 30 or more days. In truth, the bank had at least $13 million in outstanding loans, payments on which were past due for 30 or more days.
As part of a civil enforcement agreement entered with the FDIC, which is incorporated into the plea agreement, Bishop will pay $300,000 to the FDIC and agree to a lifetime prohibition from participating in the conduct of the affairs of any federally insured financial institution.
James E. Bishop, II is scheduled for a plea hearing on September 5, 2013.
U.S. Attorney Jenny A. Durkan announced the guilty plea.
The case was investigated by the FDIC Office of Inspector General (FDIC-OIG) and the FBI.
The case was prosecuted by Assistant United States Attorney Matthew Diggs.
“Our economy depends on every bank following the rules. Banking rules protect individual depositors as well as our financial system,” said U.S. Attorney Jenny A. Durkan. “These defendants—both experienced bankers—took a myriad of steps to hide the true financial condition of Summit Bank from federal and state regulators.”
“When we put our money in a bank, we also place our trust in those who operate it,” said Special Agent in Charge Laura M. Laughlin of the FBI Seattle Office. “The FBI is committed to working with our partners to bring to justice those who would violate that trust.”
“We are pleased to join our law enforcement colleagues and the U.S. Attorney’s Office in announcing this guilty plea,” said Wade Walters, Special Agent in Charge of the Western Region FDIC Office of Inspector General. “We are committed to ensuring the integrity of the banking industry and are especially concerned when bank insiders abuse their positions of trust and attempt to deceive the regulators. It is fitting punishment that Mr. Bishop will be imprisoned, fined, and prohibited from participation in the affairs of any federally insured financial institution going forward.”