WILMINGTON, Del. (AP) — The former chief credit officer of the only financial institution criminally charged in connection with the federal bank bailout program was sentenced Wednesday to 4½ years in prison for helping mislead investors and federal regulators about the bank’s troubled condition in the wake of the 2008 financial crisis.
Former Wilmington Trust executive William North, 59, was also ordered to pay a $100,000 fine.
North’s sentencing came two days after two former Wilmington Trust colleagues, bank president Robert Harra Jr. and chief financial officer David Gibson, were sentenced to six years in prison and ordered to pay fines of $300,000 each.
Former Wilmington Trust controller Kevyn Rakowski was to be sentenced later Wednesday.
Prosecutors said the defendants misled regulators and investors about Wilmington Trust’s massive amount of past-due commercial real estate loans before the bank was hastily sold while teetering on the edge of collapse. The century-old bank, founded by members of the du Pont family, imploded despite receiving $330 million from the federal Troubled Asset Relief Program.
Unlike Harra and Gibson, North chose to address the court. He started by thanking family members, friends and industry colleagues who turned out in such numbers that officials opened another courtroom so supporters could watch the proceedings on closed-circuit television.
“This may not be the type of Kodak moment that I would prefer for such a gathering,” he joked.
On a more serious note, North described himself as a proud American who believes that citizenship comes with certain expectations.
“I continue to have faith in our judicial system. As a proud American, I respect the process and the verdict,” he said.
In sentencing North, U.S. District Judge Richard Andrews took note of his support in the community, his personal characteristics and his work ethic. North took a second job delivering newspapers as a young bank executive to help support his family.
“While banking is not in your future, it appears that you have a lot of skills that could be helpful,” the judge told North. “You made a big mistake here … but it’s not your usual self. So, I wish you well in the future.”
While prosecutors agreed that North was less culpable than Harra and Gibson, Assistant U.S. Attorney Lesley Wolf said North violated the trust on which the banking industry is built and failed to ensure that Wilmington Trust’s lending practices were sound.
North was convicted of conspiring with the other defendants to conceal Wilmington Trust’s massive amount of past-due commercial real estate loans. In the fourth quarter of 2009, for example, Wilmington Trust officials reported only $10.8 million in commercial loans as 90 days or more past due, concealing more than $316 million in past-due loans subject to an internal “waiver” practice for reporting purposes.
“Defendant North, perhaps more than anyone, was uniquely situated to put an end to the waiver practice. … He knew it was a problem, he knew it was wrong, and he did nothing about it,” Wolf said.
Evidence showed there were internal concerns about Wilmington Trust’s loan portfolio as early as 2007, when North indicated that the number of waived loans was too high and that bank officials needed to get the situation under control to avoid issues with examiners, auditors and executive management.
North continued to send warnings about shoddy handling of troubled loans, but Wolf suggested he should have done more, noting that he continued to approve waivers “with his eyes wide open.”
After an October 2009 meeting to discuss matured loans and “how to make them go away” by year’s end, bank officials decided on temporarily extending more than 800 commercial loans worth $1.3 billion. North sent an email to Harra in December 2009 referring to certain loans as “credit turds.”
Meanwhile, before its 2011 fire sale to M&T Bank, Wilmington Trust raised $287 million in a 2010 stock offering, intended in part to help repay the TARP funds, while concealing the truth about its shaky financial condition from investors.
Wilmington Trust Corp., which was also criminally charged in the case, reached a $60 million settlement with prosecutors last year on the eve of a scheduled trial. The agreement included a civil forfeiture of $44 million and $16 million previously paid by Wilmington Trust to the Securities and Exchange Commission in a related lawsuit.
In a separate civil action, a federal judge last month approved a settlement in which Wilmington Trust agreed to pay $200 million cash to settle a shareholder lawsuit alleging that the bank fraudulently concealed billions of dollars in bad loans. Auditing firm KPMG agreed to pay an additional $10 million as part of the settlement.