Former bank executive fined $500 for her role in scheme to defraud SBA
One of the defendants in a million-dollar banking scheme to defraud the federal government has been fined $500 for her role in the matter. (Photo by krisanapong detraphiphat/Getty Images)
One of the defendants in a million-dollar banking scheme to defraud the federal government has been fined $500 for her role in the matter.
U.S. District Judge Stephanie Rose on Tuesday sentenced Susan McLaughlin of the now-shuttered Valley Bank in Moline, Illinois, to time served on a felony conviction of conspiracy to commit mail fraud and imposed a $500 fine and $100 special assessment.
McLaughlin was one of several individuals indicted for a scheme through which Valley Bank attempted to defraud the Small Business Administration of millions of dollars.
Larry Charles Henson of Davenport, the former president and chairman of the bank, allegedly led the effort to shift millions in potential losses from the bank to the SBA, according to court records. Prosecutors alleged that Henson and others – including Michael Barry Slater of Des Moines, who was the founder and president of Vital Financial Services in Clive — engineered those loans so that it appeared the borrowers qualified for SBA guarantees.
To do this, according to court records, they completed loan-guarantee applications that included false statements about both the borrowers’ eligibility to receive the loans and the eventual disbursement of the loan proceeds.
As part of the scheme, Henson and Valley Bank Vice President Andrew Erpelding instructed McLaughlin, also a bank vice president, to alter the bank’s loan-payment reports. McLaughlin complied, according to court records, changing one borrower’s payment history to eliminate any evidence of past-due payments.
In March, Henson was sentenced to nine months in prison and ordered to pay $4.5 million in restitution after being charged with wire fraud. Slater and Erpelding have yet to be sentenced for their role in the matter.
Prior to McLaughlin’s sentencing, prosecutors argued for a one-year term of supervised release, saying that her “criminal actions caused substantial damage.” Such a sentence, they argued, would “deter future criminal acts” and would also “emphasize the seriousness of the offense, promote respect for the law, and provide well-deserved and just punishment.”
Defense attorney: McLaughlin was a ‘whistleblower’
McLaughlin’s public defender, Melanie S. Keiper, had argued for the sentence that was imposed, telling the court that McLaughlin, now 68, had carried out Henson’s orders under the threat of being fired.
“She wishes she would have been strong enough to stand up to Larry Henson and risk losing her job,” Keiper told the court. “She ultimately lost it anyway, along with the value of her employee stock ownership plan, due to Henson’s repeated actions that caused the bank’s failure.”
Keiper characterized McLaughlin as a “whistleblower” who had provided documents to investigators and showed auditors where to look.
“Her reward for such behavior is a felony indictment and conviction,” Keiper said, adding that her client, although a bank vice president, “was literally the lowest cog” in the machinery that was constructed to defraud the SBA. Keiper described McLaughlin’s role as nothing more than “data entry.”
A pre-sentence investigation report on McLaughlin, cited by Keiper, stated that McLaughlin “did not appear to participate in the planning or organizing” of the scheme and “did not exercise any decision-making authority.”
“Henson was the undisputed leader, mastermind, and dictator,” Keiper told the court. “Even though no bodily injury was verbalized, she still felt threatened.
Attorney: Bank’s lawyer had conflict of interests
In arguing for the lesser sentence, Keiper told the court that her client and other bank employees were provided legal advice by attorney Jeff Lang of the Davenport law firm Lane & Waterman, which was a customer and a vendor of Valley Bank.
It was either the bank, or the bank’s holding company, that paid for those legal services, Keiper told the court, adding that Lang had assured McLaughlin the authorities were interested only in pursuing a case against Henson.
In 2014, Keiper said, McLaughlin “told the investigators everything she knew” and provided them with the evidence that would later be used against her.
“Lang had a conflict of interest with every one of those employees that he certainly should have been aware of as a former United States Attorney,” Keiper told the court. “He represented Valley Bank and also advised Ms. McLaughlin and numerous others on the same criminal matter in which they were adversarial parties and in which he was being paid by the bank.”
Keiper alleged that “the faulty legal advice given to Ms. McLaughlin by Lang resulted in her providing statements and the documentation to incriminate herself, and (which) subsequently led to this prosecution.”
The Iowa Capital Dispatch was unable to reach Lang for comment after Tuesday’s sentencing.
According to Lane & Waterman, in addition to spending more than 15 years as the assistant or interim U.S. Attorney for the Central District for Illinois, Lang was once an FBI agent and now leads the law firm’s white-collar criminal defense practice.
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