Four former Wilmington Trust Corp. executives were accused by federal officials of hiding $351 million worth of past-due loans from regulators before the Delaware-based bank was bought by M&T Bank Corp. in 2010.
William North, the former chief credit officer, and Kevyn Rakowski, the ex-controller, face charges of making false statements to regulators.
In a separate lawsuit, former Chief Financial Officer David R. Gibson and former Chief Operating Officer Robert V.A. Harra were accused of participating in the scheme to hide the loans. Regulators are seeking to bar the men from serving as corporate officers.
“Bankers across our nation faced rising past-due loans during the financial crisis, but not all made a choice to hide the bad loans from shareholders and regulators,” Christy Romero, the special inspector general for the federal Troubled Assets Relief Program, said in a statement. The agency helped investigate the case.
Rakowski, 61, didn’t immediately return a phone message left at his home in Florida. North, 55, couldn’t be immediately reached for comment.
“Dave Gibson did nothing wrong here, and he looks forward to his day in court,” said his lawyer, Kenneth Breen. “The SEC’s case is desperate and the allegations are untrue.”
Harra will vigorously fight the allegations, said his lawyer, Andrew Lawler.
“Bob Harra was a loyal and dedicated employee of Wilmington Trust Co. for more than 40 years,” Lawler said. “He is surprised and deeply disappointed that the SEC has decided to file this civil action against him. He intends to vigorously fight the allegations in court.”
Wilmington Trust put itself up for sale in 2010 as it prepared to report a sixth straight quarterly loss. In the four days before M&T bought the bank, Wilmington Trust lost 46 percent of its value.
North and Rakowski are accused of excluding a large number of the loans that were 90 days past due from the bank’s internal reports in 2009. The two knew their actions would hide the information from the Securities and Exchange Commission and the Federal Reserve, according to prosecutors.
The case is U.S. v. North, 15-cr-00023, U.S. District Court, District of Delaware (Wilmington).