Former Bank Founder and President Pleads Guilty to Bank Fraud
|U.S. Attorney’s Office December 17, 2013|
WILMINGTON, DE—Charles M. Oberly, III, United States Attorney for the District of Delaware, announced today that James A. Ladio entered a guilty plea before the Honorable Richard G. Andrews to a four-count felony information charging him with bank fraud, in violation of Title 18, United States Code, Section 1344 (counts one and three); and money laundering, in violation of Title 18, United States Code, Section 1957 (counts two and four).
According to the criminal Information and plea agreement, Ladio was the founder and former president and chief executive officer of MidCoast Community Bank Inc. (MidCoast). MidCoast, headquartered in Wilmington, has four branch locations across the state of Delaware. The four-count nformation describes two occasions in which Ladio convinced existing MidCoast customers to apply for commercial loans, ostensibly for valid business purposes. The true purpose of the loans, however, was to allow those MidCoast customers to loan money to Ladio.
The first bank customer (Bank Customer A) applied in October 2010 to transform an existing commercial mortgage at MidCoast into a $700,000 line of credit. Although the loan package indicated that the purpose of the line of credit was to make capital improvements on a particular building project, the actual purpose of the request was for Bank Customer A to obtain funds which could be used to make a short-term loan to Ladio. After MidCoast’s loan committee approved the request, Bank Customer A drew $650,000 from the line, which was deposited into Bank Customer A’s account on or about October 28, 2010. That same day, approximately $629,240 was wired from the account controlled by Bank Customer A to Ladio’s personal checking account.
Similarly, the second bank customer (Bank Customer B) applied to MidCoast in July 2011 for a working capital line of credit in the amount of $700,000. Although the loan package indicated that the purpose of the loan was for “working capital for Bank Customer B’s various business interests,” the actual purpose of the request was for Bank Customer B to obtain funds that could be used to make a short-term loan to Ladio. After MidCoast’s loan committee approved the request, MidCoast wired $650,000 into a bank account held by Bank Customer B at another financial institution. That same day, $639,000 was wired from Bank Customer B’s account to Ladio’s personal bank account.
Because on each occasion the proceeds of the loan fraud activity resulted in more than $10,000 being deposited into Ladio’s personal bank account, Ladio also faces two counts of money laundering.
Ladio, age 57, is a resident of Wilmington, Delaware. For the bank fraud charges (counts one and three), Ladio faces a maximum penalty of 30 years’ imprisonment; a fine of $1,000,000.00; a term of supervised release of five years; a $100.00 special assessment; and mandatory restitution. For the money laundering charges (counts two and four), Ladio faces a term of imprisonment of ten years; a fine of $250,000.00; a term of supervised release of three years; and a $100 special assessment. Sentencing has been scheduled for April 17, 2014, at 9:00 a.m.
United States Attorney Oberly said, "Mr. Ladio’s serious fraudulent conduct betrayed the trust of MidCoast’s shareholders, its employees, and its customers. Our office will continue to vigorously investigate and enforce criminal conduct relating to bank fraud, particularly with respect to Delaware-based financial institutions.”
"Ladio’s fraud was uncovered after it was discovered that he had failed to notify his lender, a TARP bank, that he had sold an investment property for which he had taken out a mortgage loan at the bank,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “Ladio’s failure to comply with his loan requirements was an initial step in a continued course of misconduct culminating in bank fraud against MidCoast Community Bank, where he was president and CEO. SIGTARP and our law enforcement partners will hold accountable and bring to justice those responsible for fraud related to TARP.”
The FBI works diligently to protect the integrity of the United States banking industry by identifying and securing evidence to prosecute white-collar criminals such as Mr. Ladio. This case should serve as a warning to others that such conduct will not be tolerated by the FBI and our law enforcement partners.
“Professionals, including bankers, who promote fraudulent schemes to abuse our financial systems, will be held accountable,” said Special Agent in Charge Akeia Conner, IRS-Criminal Investigation. “This joint endeavor continues to demonstrate our efforts to ensure that the financial services industry will not be used for personal financial gain and will be challenged to operate in a fair and honest manner to promote the public interest.”
The case was investigated by the Federal Bureau of Investigation, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Internal Revenue Service Criminal Investigation Division, and it is being prosecuted by Assistant United States Attorneys Robert F. Kravetz, Lesley F. Wolf, and Ilana H. Eisenstein.