A federal judge sentenced two former Wilmington Trust executives to prison Wednesday for covering up the bank’s dire financial condition in the wake of the 2008 financial crisis.
Kevyn Rakowski, a former controller at the bank, was sentenced to three years in prison. William North, a former chief credit officer, was sentenced to four and a half years in prison and ordered to pay a $100,000 fine.
On Monday, two of their colleagues were handed prison terms.
The sentences send “a clear message that top corporate bankers cannot lie to their regulators and the public about important disclosures that affect the safety and soundness of banks and impact the decision of investors to buy or sell stock,” said U.S. Attorney General David Weiss.
“The defendants’ actions contributed to the downfall of an important Delaware institution, causing hundreds of employees to lose their jobs and investors to lose hundreds of millions of dollars when the bank’s stock price collapsed,” he said. “The sentences imposed by the court appropriately punish the defendants for their serious criminal conduct and strongly encourage other corporate executives to follow the law.”
Last year, Wilmington Trust, which continues to operate, reached a $60 million settlement with prosecutors. In a separate case last month, the bank agreed to pay $200 million cash to settle a shareholder lawsuit.
Earlier in the week, the bank’s former president Robert Harra and former chief financial officer David Gibson each were sentenced to six years in prison and ordered to pay a $300,000 fine.
Weiss said the sentences are appropriate and will deter financial crime.
The four hid millions of dollars in bad loans on the bank’s books from the Federal Reserve, the Securities and Exchange Commission and the public between October 2009 and November 2010.
Prosecutors said the defendants schemed to hide the true volume of past-due loans on a “second set of books” and were well aware the practice was illegal.
By the end of 2009, the bank reported only $10.9 million in bad loans, while waiving more than $360 million, prosecutors said. The bank also raised $287 million in investments without disclosing its financial problems to investors.
When the defendants knew they could no longer hide the practice, prosecutors said, they created a “mass extension process” of temporarily extending loans on a short-term basis.
In under two months, the bank allegedly extended about 800 loans worth more than $1.3 billion. Prosecutors said some borrowers didn’t know their loans had been extended.
During sentencing, Judge Richard Andrews said while North and Rakowski played roles in the criminal act they were not as significant as the other defendants. He said he also took into consideration their otherwise good characters and commended North on continuing to work a job during the case.
Attorneys, friends and co-workers also spoke on behalf of the North and Rakowski.
Rakowski spoke about the strain it has had on her family, telling the judge she believes her husband’s death a few months ago was brought on by the stress of the trial. She said no one in the bank intentionally committed a crime, and she apologized to those who lost their jobs or money due to the bank’s downfall.
“I wish I had questioned more thoroughly the practice of past due loans, and the way they were reported. Not a day goes by where I don’t regret it,” Rakowski said. “I’m truly sorry for anyone who was harmed throughout all this. It’s something I have to live with.”
North said the conviction was the lowest part of his life, and that it does not represent his values as a human being.
“It was a terrible thing, and it was not the happy ending I or anyone at the bank envisioned,” he said of the individuals who lost jobs at the bank. He added he constantly “hits the replay button” to think of what he could have done differently.
Attorneys for the four say they’ll appeal.