The former president and chairman of a defunct Oklahoma bank has been convicted by a jury on charges of fraud in connection to approvals he made on fraudulent loans for real estate and other investments, the U.S. Attorney’s Office for the Western District of Oklahoma has announced.
Paul Doughty, 67, who served as the president and chairman of First State Bank of Altus, was found guilty of 10 charges of bank fraud, conspiracy to commit bank fraud, misapplication of bank funds, making a false bank entry and authorized issuance of a bank loan while he was in charge at the bank.
From 2006 to 2007, Doughty and co-conspirator, Fred Anderson, engaged in a scheme that involved recruiting straw buyers to obtain loans for 19 Colorado real estate lots that cost about $700,000 each, the trial evidence has shown.
Doughty then approved and issued loans on 14 lots to buyers which amounted to more than $10,000,000 in loan proceeds for the seller, Mountain Adventure Property Investments, a company in which Anderson served as president and manager, the U.S. Attorney’s Office stated.
Court evidence shows that Doughty and Anderson allegedly offered the lots to borrowers as “zero money down” investments, and down payments made on the lots were usually deferred or later refunded to the buyers by Anderson on behalf of Mountain Adventure Property Investments. The pair also assured buyers that Mountain Adventure will make all loan payments to the bank.
Also, each of the loans issued by Doughty actually exceeded his individual lending authority at First State Bank, and most of the loans were issued without the approval of the bank’s loan committee, including a $580,000 loan to Anderson’s personal company. In the few occasions that he presented loans before the committee, Doughty made several misrepresentations in regards to the source and amount of the borrowers’ down payments and the borrowers’ responsibility for making payment on the loans.
In a related scheme, Doughty issued a $2 million loan to Ethanol Products Group, a startup company that both Anderson and Doughty controlled. The loan which was advanced from FSB was above Doughty’s individual lending authority and was made without the approval of the bank’s loan committee or board.
Evidence presented in court also showed an email exchange between the two on a “cash strategy” that contained details on how loan proceeds will be diverted to leave them with more than $100,000 in “officer bonuses”.
Ultimately, First State Bank was closed by state banking regulators in July 2009 due to huge loan losses and in April 2016, Anderson pleaded guilty to conspiring with Doughty to commit bank fraud and he agreed to testify as a witness in Doughty’s trial, according to the plea agreement made with the government.
Anderson now faces up five years in prison and a fine of $250,000, while Doughty faces up to 30 years in prison and a fine of $1 million for each of the ten counts of conviction.
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