The former president and six other officers of First National Bank of Savannah on Friday were indicted by a federal grand jury in Savannah, accused of defrauding First National Bank and other banks out of millions of dollars.
The long-running scheme allegedly contributed to the failure of First National Bank in 2010, which will cost the FDIC deposit-insurance fund more than $90 million, according to a press release from the U.S. Attorney’s office for the Southern District of Georgia.
The indictment comes on the heels of the 2011 prosecution of Savannah real estate developer Richard Guerard for scheming with First National Bank officials and employees to defraud the bank and others to cover loan shortfalls for two of his companies.
He pleaded guilty in May 2011 and was sentenced to 52 months in federal prison in August 2011.
The 35-count indictment charges the following former officers of First National Bank:
• Heys Edward McMath III, 58, who served as the president and CEO. McMath is charged with conspiracy, bank fraud, misapplication of bank funds and false statements to influence a bank.
• Stephen Michael Little, 65, who served as the executive vice president and CFO. Little is charged with conspiracy and bank fraud.
• Robert Wilson Dailey, 51, who served as the city president and senior lending officer. Dailey is charged with conspiracy, bank fraud and false entries made in bank records.
• Jay Patrick Gardner, 62, who served as a vice president and the chief credit officer. Gardner is charged with conspiracy and bank fraud.
• Isaac Jefferson Mulling, 53, who served as a senior vice president and commercial loan officer. Mulling is charged with conspiracy, bank fraud, false statements to influence a bank and false entries made in bank records.
• Alan Robert Fleming, 36, who served as the city president of the Tybee Island branch and a commercial loan officer. Fleming is charged with conspiracy, bank fraud, misapplication of bank funds, false statements to influence a bank and false entries made in bank records.
• Jeffrey Allen Farrell, 44, who served as the city president of the Richmond Hill branch and a commercial loan officer. Farrell is charged with conspiracy, bank fraud, false statements to influence a bank and false entries made in bank records.
Initial appearances before U.S. Magistrate Judge G.R. Smith have not been scheduled, First Assistant U.S. Attorney James D. Durham said Friday. He is prosecuting the case along with Assistant U.S. Attorney Jennifer Solari.
According to allegations in the indictment, as First National Bank’s financial condition began to deteriorate, the defendants schemed to hide millions of dollars in non-performing loans from the bank, members of the bank’s board of directors and from federal regulators.
According to the indictments, the defendants accomplished the scheme by unlawfully loaning money to unqualified nominees to make interest and other payments on other non-performing loans; enticing others to take over non-performing loans with hidden promises, side deals and other terms unfavorable to First National Bank; and recruiting other banks to fund non-performing loans based on fraudulent misrepresentations about the quality of the loans.
To assist in their scheme, the government charges, the defendants falsified and fabricated numerous bank documents and records.
First National Bank closed its doors and was taken over by the government in the summer of 2010, largely because of the troubled loans. It remains in receivership of the Federal Deposit Insurance Corp. The Savannah Bank took over its deposits and operations of its four branches.
Officials said the case is the result of a joint investigation conducted by the Board of Governors of the Federal Reserve Office of Inspector General; the FDIC Office of Inspector General; the U.S. Department of Treasury Office of Inspector General; the U.S. Secret Service; and the U.S. Attorney’s Office.