Bank executive sentenced to 5 years in prison for fraud of $ 15 million
A former banking executive has been sentenced to five years in prison for a fraudulent $ 15.2 million loan scheme involving 26 Kansas banks.
Authorities on Tuesday announced that United States Chief District Judge Julie A. Robinson had sentenced Troy Gregory, of Lawrence, Kansas, to 60 months in prison, followed by 3 years of supervised release and more than 4 years. , $ 7 million in compensation for the implementation of the program.
The fraudulent loan was initiated in 2007 after Gregory, a senior loan officer at National Bank of Lawrence University, previously made a large loan to a group of developers for a speculative single-family housing project near Junction City, Kansas. , according to Kansas City Business Journal.
The housing project targeted U.S. Army soldiers stationed nearby, but was unsuccessful as the soldiers preferred to rent properties rather than buy homes in the area, forcing developers to struggle. to repay the loan.
Gregory, 53, then launched a new loan for the same group of developers, convincing 25 other banks to join his in helping finance the construction of an apartment complex. However, the new loan was actually made so borrowers could repay their previous loans, prosecutors said.
Gregory twisted the borrowers’ financial situation to convince other banks to participate in the loan, did not disclose debts on the apartment, and falsely claimed the developers had around $ 1.7 million in certificates of deposit. to be used as collateral for the loan.
After the loan was made, Gregory used the funds to pay off the building’s debt and make payments on unrelated loans. He also used $ 1 million from the loan to purchase some of the certificates of deposit that had been pledged as collateral.
The housing market then collapsed, resulting in a lower than expected valuation for apartments and pushing the loan into default. The other banks, which would not have participated in the loan without Gregory’s false assurances, were forced to write off debts and lost about $ 5 million.
Gregory was indicted in connection with the scheme in November 2017, charged with four counts of bank fraud, two counts of making false statements and one count of conspiracy to commit bank fraud. He was convicted of all charges except the conspiracy charge after a two-week trial in August 2019.
The conviction was originally scheduled to take place in January, but was postponed after former U.S. District Judge Carlos Murguia, who presided over the trial, was reprimanded for unrelated sexual misconduct, before resigning from court.
Although Gregory was sentenced to 5 years, charges of which the former executive was convicted carry a combined maximum of 70 years. The case was investigated by the FBI, IRS, the Office of the Inspector General of the Federal Housing Finance Agency and the Office of the Inspector General of the Federal Housing Corporation. deposit insurance. He was prosecuted by the criminal division of the Ministry of Justice.
News week has contacted the Justice Department for comment.