United States Attorney
Eastern District of Virginia
Friday, August 24, 2012
Virginia Developer and Restaurateur Pleads Guilty to Massive Bank Fraud
NORFOLK, Va. – Thomas E. Arney, 56, of Chesapeake, Va., pleaded guilty today to engaging in a massive bank fraud scheme that contributed to the failure of the Bank of the Commonwealth.
Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia; John Boles, Special Agent in Charge of the FBI’s Norfolk Field Office; Rick A. Raven, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Washington, D.C., Field Office; Christy L. 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 U.S. District Judge Raymond A. Jackson.
Arney pleaded guilty today to a three-count criminal information charging him with conspiracy to commit bank fraud, unlawful monetary transactions and making false statements. Arney faces a maximum penalty of five years in prison each for the conspiracy and false statement counts and 10 years in prison for the unlawful monetary transactions count when he is sentenced on Dec. 3, 2012.
According to the statement of facts filed with his plea agreement, Arney admitted that he performed favors for insiders at the Bank of the Commonwealth in exchange for preferential lending treatment and assisted insiders in concealing the extent of the bank’s true financial condition by purchasing bank-owned property.
For example, Arney admitted in court that in June 2008 he purchased a condominium in Norfolk owned by the bank’s chief executive officer, Edward J. Woodard, and that Woodard and commercial loan officer Stephen G. Fields caused the bank to fully fund a $433,000 loan for the purchase of the property. Arney falsely represented that he intended to use the Norfolk condominium as a second home. In fact, Arney admitted he purchased the condominium as a favor to Woodard and in return for preferential treatment on his loans at the bank. In his statement of facts, Arney stated that Woodard made a $52,877.45 profit on the sale of this property. Arney never made a single principal payment on the loan.
According to court records, 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.
From 2008 up to its closing in 2011, the bank lost nearly $115 million. Court records allege that the bank's failure will cost the federal government through the deposit insurance fund in excess of $260 million.
This ongoing investigation is being conducted by the FBI’s Norfolk Field Office, IRS-CI, SIGTARP and the FDIC-OIG. Assistant U.S. Attorneys Katherine Lee Martin, Melissa E. O’Boyle and Uzo E. Asonye are prosecuting the case on behalf of the United States.
The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.
This prosecution is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.