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The $41 million scam resulted in the failure of Bank of Commonwealth. Image: ThinkStock
The $41 million scam resulted in the failure of Bank of Commonwealth. Image: ThinkStock

Virginia Man Sentenced for Bank of Commonwealth Scam

OCT 17, 2012 11:57am ET
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A Virginia businessman who participated in an elaborate fraud scheme that led to Bank of Commonwealth’s collapse has been sentenced to 14 years in federal prison.

George Hranowskyj pleaded guilty in July to conspiracy to commit wire fraud and bank fraud.

According to court records, from January 2008 to August 2011, Hranowskyj and his business partner, Eric Menden, performed favors for insiders at the Bank of Commonwealth in exchange for preferential lending treatment.  

As part of the scam, the two business partners helped senior bank executive’s extend-out bad loans pretending that they were current on the bank’s books. Furthermore, they concealed the extent of the bank’s nonperforming assets by purchasing REO properties at auction using the bank’s own money.   

The two fraudsters obtained loans simply by sending an email to a bank insider asking for money to buy a home, court records said.

When the bank failed on Sept. 23, 2011, the two business partners were the bank’s largest lending relationship‑guaranteeing approximately $41 million in loans. The Office of the Special Inspector General for the Troubled Asset Relief Program said almost all of these loans were on an interest-only basis, and the two men were regularly permitted to overdraw their account.

“Hranowskyj treated this bank like he owned it, calling himself ‘Bid Daddy’ to bank employees, overdrawing his accounts by $600,000, and demanding that the bank ‘lower his rates ASAP’ and cash his employees’ paychecks even though his account was in the red, said Christy Romero, special instructor general for the Troubled Asset Relief Program.

Romero added that Hranowskyj threatened to stop participating in the fraudulent scam if bank insiders did not do what he wanted.

“Mr. Hranowskyj’s agreement to perform personal and professional favors for bank insiders in exchange for unfettered access to millions of dollars in credit exposes the ugly underbelly of how certain insiders treated the Bank of Commonwealth as their personal piggy bank,” said U.S. Attorney for the Eastern District of Virginia Neil MacBride.

Mended was sentenced last month to serve an 11-year prison term after pleading guilty to his role in this fraudulent REO scheme.

 

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