After six and a half weeks of trial, attorneys representing four former Wilmington Trust executives accused of bank fraud concluded their closing arguments late Wednesday morning.
The jury is now deliberating on multiple counts for each defendant, including lying in securities filings and to agencies of the federal government; conspiracy to defraud the U.S. and to commit fraud in connection with the purchase and sale of securities; making false statements to regulators; and a host of related charges.
During closing arguments Wednesday, defense attorney Henry Klingeman contended emails and testimony discussed throughout the trial do not provide enough evidence for the jury to find the defendants guilty beyond a reasonable doubt.
He argued the email evidence presented by prosecutors is weak because much is left up to interpretation.
“We’re not afraid of any evidence in this case,” Klingeman said. “Almost all the facts in this case are undisputed. We accept the facts the government presented to you. What they say happened in terms of historical facts happened. The problem is we disagree with every fiber of our being about the conclusion the government has drawn that this is a crime.”
“Every email, every testimony, might be subject to whatever interpretation or spin they want to put on it,” he continued. “But it’s equally susceptible to an interpretation consistent with innocence.”
The day before, defense attorneys argued evidence proves Robert Harra, David Gibson, William North, and Kevyn Rakowski were acting in “good faith” in how they handled overdue loans.
The defendants are accused of hiding millions 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 claim the four schemed to hide the true volume of losses. By the end of 2009, the bank reported just $11 million in past-due loans while waiving more than $360 million worth, prosecutors allege. They contend the bank never disclosed its financial circumstances to investors.
In October, Wilmington Trust reached a $60 million deal with the U.S. attorney’s office to settle criminal charges against it.
During the recession, many of the banks’ commercial clients, such as home builders and developers, were struggling to pay off their loans. In order to portray a solid loan portfolio, prosecutors have argued, the executives created “two sets of books.”
When the waiver practice became “overwhelming,” the defendants created a “mass extension process” of temporarily extending loans on a short-term basis, prosecutors said.
In less than two months, the bank allegedly extended about 800 loans worth more than $1.3 billion. Prosecutors argue some borrowers didn’t know their loans had been extended.
Throughout the trial, the prosecution and defense have argued over individual interpretations of “past due” and what is required to be reported by law.
This week, defense attorneys argued financial statements and emails between dozens of employees, the Federal Reserve, and auditors openly addressing waived loans and short-term extensions prove their practices were not concealed.
On Wednesday, Klingeman argued emails between his client Rakowski, the three other defendants, and bank employees stressing the importance of addressing an abundance of past due loans shows they were attempting to fix the problems.
“It’s evidence of people going to work every day and doing their best to weather the storm,” Klingeman said.
He argues the openness of emails and letters between the defendants and others show the case is “either the dumbest conspiracy in American history — or there’s no conspiracy.”
During his rebuttal Wednesday, prosecutor Jamie McCall argued emails do prove the defendants’ guilt. He pointed to an email from Rakowski to Gibson stating, “We did pull the waived loans.” McCall said Rakowski also attempted to justify the spike in waived loans as a billing and collection error.
McCall also argued the defendants used the waiver practice as a way to hide its true condition from the public, and ignored warnings from auditors, the Federal Reserve, and other outside parties about significant problems in its loan portfolio.
He said it wasn’t until the Federal Reserve was on its radar that the bank changed its policy of waiving loans.
McCall told jurors the bank lied when it reported to the public its past due numbers had declined, and that it had a rigorous loan underwriting policy and regularly reviewed past due loans.
“Instead of owning that problem, they misled the Federal Reserve, they misled the public, and they turned around and raised $287 million off that lie,” McCall said.
Disclosure: Wilmington Trust supports WHYY.