Bank of the Commonwealth Loan Officer Pleads Guilty to Bank Fraud Conspiracy

NORFOLK, VA—Jeremy C. Churchill, 35, of Norfolk, Virginia, pled guilty today in Norfolk federal court to conspiring with others to cause the Bank of the Commonwealth to suffer millions of dollars in losses from loans meant to conceal financial problems at the bank and with one of its customers.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; John Boles, Special Agent in Charge of the FBI’s Norfolk Field Office; Eric C. Hylton, Acting Special Agent in Charge of the Internal Revenue Service Criminal Investigation’s Washington, D.C., Field Office; Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG), made the announcement after the plea was accepted by United States District Judge Arenda L. Wright Allen.

Today, Churchill pled guilty to conspiracy to commit bank fraud. He faces a maximum penalty of five years in prison when he is sentenced on Aug. 24, 2012.

Court records indicate that in November 2008, the Bank of the Commonwealth sent to the Federal Reserve an application requesting approximately $28 million from the Troubled Asset Relief Program (TARP). Based on its regulator’s concerns about the health of the bank, the Federal Reserve later requested that the bank withdraw its TARP application, which the bank did. A September 2009 examination of the bank concluded that the overall financial condition of the bank had deteriorated to an unsafe and unsound condition and raised concerns regarding numerous practices that management used to mask the past due status of loans, including extending new loans so that borrowers could pay on existing loans.

According to the statement of facts filed with his plea agreement, in January 2010, Churchill was employed by the bank as a vice president and commercial loan officer when a bank customer—the president of Tivest Development & Construction LLC and Genesis Staffing—was having difficulty keeping current on more than $8 million in loans at the bank.

Churchill admitted that, under the direction of another conspirator at the bank, Churchill submitted multiple requests to provide more than $1 million to Tivest and Genesis Staffing, which were approved by the bank based on false information about how the funds would be used and the total financial exposure of the bank customer. Despite claims that the funds were intended for pre-development costs for an office tower project in Norfolk and operational costs at the staffing company, the bank customer used the proceeds to make interest payments on bank loans.

In addition, Churchill submitted a request to provide a $4.1 million loan to Tivest, which would be used to purchase an incomplete condominium project located at 310 24th Street in Virginia Beach, Virginia that Churchill and the bank conspirator feared would cause the bank to suffer a significant financial loss if it foreclosed.

Churchill admitted that he and the bank conspirator used half the loan proceeds to pay down the underlying loan. From March 2010 through October 2010, Churchill and the bank conspirator funded eight construction draw requests from Tivest for the 24th Street condominium project, despite knowing the requests inflated the amounts owed contractors and included costs for work that was not completed. Instead, the bank customer used the funds to make interest payments on bank loans. By October 2010, the $4.1 million loan was fully funded, yet the construction work was only about 50 percent complete.

By June 2011, the bank charged off a $250,000 loan to Genesis Staffing and a $730,000 line of credit to Tivest as a loss, along with $1,321,455 of the loan for the 24th Street condominium project as a loss. The 2011 city-assessed value of that property is $650,600.

This ongoing investigation is being conducted by the FBI’s Norfolk Field Office, IRS-CI, SIGTARP, and the FDIC-OIG. Assistant United States Attorneys Melissa E. O’Boyle, Katherine Lee Martin, and Uzo Asonye are prosecuting the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae.