Bank Fraud--BestBank

The Floridian co-owners of a company doing business with the now-defunct Denver-based BestBank were convicted on over 60 counts including bank fraud, wire fraud, and operating a continuing financial crimes enterprise.^[1] Glenn Gallant and Douglas Baetz, who operated Century Financial, were convicted for their role in one of the largest financial collapses of the 1990s; the FDIC paid nearly $200 million to reimburse depositors, and larger depositors lost nearly $27 million in uninsured funds.^[2]

Century Financial became involved when BestBank sought them out to help create fast growth.^[3] A national telemarketing campaign was created that brought in nearly 600,000 customers who took advantage of an offer to join a $498 travel club membership and a Visa card with a credit limit of $600.^[4] Century Financial, however, targeted customers with poor or insufficient credit histories; the default rate on the payments was 80 percent, and nearly half of the customers never even made their first monthly payment.^[5] Funds were shifted to make it seem like the program was working and the two Floridians received a combined $11 million in bonuses.^[6] Eventually, however, the scheme collapsed.^[7]

Bank Fraud
18 U.S.C. § 1344 makes it a crime for a person to knowingly execute a scheme to defraud a financial institution ^[8]or to obtain money or assets from a financial institution by means of false pretenses.^[9]

Violating section 1344 can be punished with a fine of up to $1,000,000, imprisonment for up to 30 years, or both.

Wire Fraud
We have preciously discussed wire fraud in conjunction with the indictments against Lord Black’s former company, here.

Operating a Continuing Financial Crimes Enterprise
18 U.S.C. § 225 makes it a crime for a person to organize, manage, or supervise a “continuing financial crimes enterprise,”^[10] and receive $5,000,000 or more in gross receipts from such an enterprise during any 24-month period.^[11]

Violating section 225 can result in a fine up to $20,000,000 and imprisonment for ten years to life.

A continuing financial crimes enterprise is defined as a series of violations under, among other statutes, 18 U.S.C. § 1344.^[12]

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[1] Florida Co-owners of Century Financial Convicted in Bank Failure, Miami Herald, Aug. 30, 2005, available here. See also John Accola, Businessmen Guilty in Bank Fraud, Rocky Mountain News, Aug. 30, 2005, available here; Greg Avery, Verdicts in BestBank Case, Boulder Daily Camera, Aug. 30, 2005, available here.
[2] Accola, supra.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] 18 U.S.C. § 1344(1).
[9] Id. § 1344(2).
[10] Id. § 225(a)(1).
[11] Id. § 225(a)(2).
[12] Id. § 225(b).