The former president and CEO of First Community Bank, Hammond, La., has been charged for conspiracy to commit bank fraud.
According to the office of the inspector general for the Troubled Asset Relief Program, Reginald Harper developed a scheme with Troy Fouquet, a local real estate developer, to create and use false loans to hide delinquent nonperforming loans.
Court documents said that in 2004, Harper loaned more than $2 million to Fouquet. The purpose of the loans was to purchase parcels of real estate, develop them into subdivisions and build houses on them. These homes would eventually been bought by prospective homebuyers who would obtain permanent mortgages to finance the purchase. The permanent mortgages would also include monies to pay back Fouquet who, in turn, would pay back the original loans made by Harper on behalf of First Community Bank.
However, a bill of information revealed that in 2005, Harper and Fouquet were having difficulty identifying qualified homebuyers who could qualify for a mortgage.
Therefore, the conspirators developed various methods to avoid reporting the delinquency on the loans made by Harper, on behalf of First Community Bank, to Fouquet and his companies.
One method used by the defendants, according to the bill of information, included Harper making “loans” to the prospective homebuyers to make it appear to the permanent mortgage lender that the prospective homebuyer had more funds on hand than they actually did.
Another method employed by the defendants, according to court documents, was to use “nominee” loans or straw borrowers to sign up for new First Community Bank loans, authorized by Harper, the proceeds of which were then utilized to pay off the original loans made to Fouquet.
Lastly, another method used by the defendants to avoid reporting the delinquency of these loans, according to the bill of information, included Fouquet presenting Harper with insufficient checks and Harper accepting them, crediting the loan payment in First Community Bank’s books and records, despite knowing the checks were insufficient.
The fraudulent methods employed by the defendants, as set forth in court documents, led to a false report of First Community bank’s financial health, which impacted an application undertaken by the bank to receive funds from the Troubled Asset Relief Program. First Community Bank was approved to receive $3.3 million in TARP funds, but the bank withdrew its application after Treasury approval.
“Instead of living up to his fiduciary duties as the president and CEO of the bank, Harper concealed the true status of the loans from the bank, regulators and the Department of Treasury in the bank’s TARP application,” said Christy Romero, deputy special inspector general for SIGTARP. “During the financial crisis, many bank executives faced losses on nonperforming loans but did not choose to commit bank fraud.”
If Harper and Fouquet are convicted of the one count charged against each of them, the maximum penalty they face is up to five years’ imprisonment and a $250,000 fine.
