A Georgia banker accused of lending a now-accused Florida real-estate fraudster money to buy a “private island” in the Caribbean has pleaded guilty to conspiracy to commit bank fraud and to receive bribes, and to a single count of tax evasion, federal prosecutors said.
Douglas Ballard, 40, of Atlanta, formerly was the executive vice president in charge of lending at Integrity Bank, a $1 billion institution that collapsed in August 2008 and was taken over by the Federal Deposit Insurance Corp. (FDIC).
“Among the roots of our nation’s financial crisis were criminal acts by bank insiders and major borrowers that contributed to the failures or bailouts of financial institutions previously believed to be secure,†said U.S. Attorney Sally Quillian Yates of the Nortern District of Georgia.
Ballard, Mitchell and Joseph Todd Foster, another Integrity vice president, were indicted under seal in April. Mitchell, 50, of Coral Gables, Fla., is a developer. Foster, 42, of Atlanta, was in charge of risk management at the bank.
Prosecutors now say Ballard has admitted that he conspired with Mitchell “to receive bribes from Mitchell and to assist Mitchell in receiving millions in loan draws under false pretenses.”
Ballard, prosecutors said, “admitted in court to receiving over $200,000 in cash and other corrupt payments from Mitchell in exchange for Ballard’s assistance in distributing millions of loan draws.
“During this same time, Ballard caused Integrity Bank to distribute nearly $20 million in loan proceeds to Mitchell’s personal account, much of which was allegedly used for Mitchell’s personal consumption (including the purchase of a private island in the Bahamas),” prosecutors said.
About $7 million of the sum was related to draws on a “construction loan relating specifically to supposed construction and renovation at the ‘Casa Madrona,’ a luxury hotel owned by Mitchell in Sausalito, Calif.
“The indictment alleges that none of this money was used for construction, and in fact no renovations had occurred,” prosecutors said.
“While Mitchell was spending much of the loan proceeds on himself, the indictment alleges that [he] paid little, if any, of his money back to Integrity to satisfy interest payments,” prosecutors said in May.
Instead, prosecutors alleged, “Mitchell paid interest on existing loans by taking draws or disbursements from other loans, and continually borrowed more and more money to keep paying the ever-increasing interest payments.”
For his part, Foster pleaded guilty to securities fraud amid allegations of insider trading.
Prosecutors said Foster “dumped his shares of Integrity stock based on his knowledge that the bank was facing an increasingly substantial but undisclosed risk that its major customer, Mitchell, would default on over $80 million in outstanding loans.”
“These officers of Integrity Bank sure weren’t living up to the bank’s name,” Yates said in May, after the April indictments were unsealed. “While the developer was living the good life, even buying a private island with Integrity’s money, and the bank’s senior loan officer was making huge commissions and taking payoffs from the developer, the bank was dying a slow death. The defendants were going to leave the bank’s shareholders and the FDIC holding the bag, but now they are being held accountable.â€
The case was brought as part of the undertakings of President Obama’s Financial Fraud Enforcement Task Force.
Mitchell paid about $1.5 million for the private island in the Bahamas, prosecutors said.
“Those who line their pockets with profits of bank fraud schemes should know they will not go undetected and they will be held accountable,†said Reginael McDaniel, special agent in charge of the IRS Criminal Investigations unit.
No sentencing dates have been set for Ballard and Foster. Ballard faces up to 10 years in prison and a fine of up to $500,000. Foster faces up to 20 years in prison and a fine of up to $5 million.
Mitchell has entered a plea of not guilty.
