White Collar Crime News

First Defendant Charged with Attempting to Defraud the (TARP) Troubled Asset Relief Program March 15, 2010

Today, CHARLES J. ANTONUCCI, SR., the former President and Chief Executive Officer of The Park Avenue Bank, was arrested on allegations of self-dealing, bank bribery, embezzlement of bank funds, and fraud, among others. ANTONUCCI also was alleged to have attempted to fraudulently obtain more than $11 million worth of taxpayer rescue funds from the Troubled Asset Relief Program, or TARP. ANTONUCCI is the first defendant ever charged with attempting to defraud TARP. Additionally, ANTONUCCI was alleged to have used The Park Avenue Bank in a scheme to defraud two pastors of a Florida congregation out of more than $100,000 set aside to build a new church.

On the evening of Friday, March 12, 2010, the NYSBD seized The Park Avenue Bank and appointed the FDIC as receiver; FDIC has arranged for the sale of The Park Avenue Bank.

According to the Complaint unsealed today in Manhattan federal court:

The Park Avenue Bank

The Park Avenue Bank was a federally insured bank headquartered at 460 Park Avenue, New York, New York, with retail branches in Manhattan and Brooklyn. The bank’s clients consisted primarily of small businesses, for whom the bank made loans, extended lines of credit, and maintained depository accounts. As of the end of 2009, the bank had approximately $500 million on deposit, and over $520 million in assets. ANTONUCCI served as President and Chief Executive Officer (“CEO”) of The Park Avenue Bank from June 2004 to October 2009, and also served on its Board of Directors.

The Park Avenue Bank was federally-insured and regulated by the FDIC. Also, as a bank chartered under the laws of New York State, The Park Avenue Bank was regulated by the NYSBD. The bank was required to make certain regular disclosures to these regulators demonstrating that it was financially sound and that it had adequate capital.

FDIC and NYSBD regulations require banks such as The Park Avenue Bank to maintain certain levels of capital, as a percentage of the bank’s total assets. Banks that do not maintain appropriate levels of capital are subject to various restrictions on their activities, and may be required by regulators to raise additional capital. Banks which do not meet minimum capital requirements can be closed by the NYSBD or the FDIC.

The Park Avenue Bank was also an applicant to the Capital Purchase Program of the Troubled Asset Relief Program (“TARP”). The purpose of TARP was to provide funds to stabilize and strengthen the nation’s financial system by increasing the capital base of viable institutions, enabling them to increase the flow of financing to U.S. businesses and consumers. TARP funds were made available to qualifying banks; one of the critical elements of the TARP qualification process was the capital position of the applicant bank.

Self-Dealing, Bank Bribery, And Embezzlement

The Complaint alleges that ANTONUCCI engaged in numerous instances of self-dealing while President and CEO of The Park Avenue Bank, including authorizing extensions of credit and overdrafts to customers with whom he had financial relationships; authorizing extensions of overdraft credit to a customer in exchange for the use of the customer’s private plane; and causing the bank to make improvements on, lease, and pay expenses for properties owned by ANTONUCCI.

The Easy Wealth Line Of Credit

ANTONUCCI used a company he owned, Easy Wealth Group, Ltd. (“Easy Wealth”), to fraudulently obtain funds from The Park Avenue Bank. ANTONUCCI could not authorize the extension of credit by The Park Avenue Bank to his own company without violating the bank’s rules against self-dealing. Accordingly, to mask his interest in Easy Wealth, in early 2006, ANTONUCCI approached an associate and offered to make him president of Easy Wealth (the “Easy Wealth president”), with the understanding that his first order of business would be to apply for a line of credit from The Park Avenue Bank.

The Easy Wealth president applied for a line of credit from The Park Avenue Bank in the amount of $300,000. ANTONUCCI personally approved the line of credit and later increased it to $400,000. ANTONUCCI even assisted the Easy Wealth president in preparing the line of credit application documents. The application as submitted contained numerous misrepresentations, including false statements concerning the Easy Wealth president’s personal assets and a fabricated business plan that contained false information about Easy Wealth’s financial condition and earnings.

After the Easy Wealth president had drawn down the line of credit, ANTONUCCI approached him and demanded that he pay $70,000 to ANTONUCCI in the form of interest-free loans. ANTONUCCI only repaid $50,000 of the money. Easy Wealth ultimately defaulted on the fraudulently-obtained line of credit, causing a loss to The Park Avenue Bank of $400,000.

The Oxygen Overdrafts

ANTONUCCI also approved approximately $8.5 million worth of overdrafts at The Park Avenue Bank to companies (the “Oxygen-related entities”) controlled by a co-conspirator (“CC-1″), who was a close associate of ANTONUCCI’s. Through the Oxygen-related entities, CC-1 brought numerous deposit accounts to The Park Avenue Bank, and submitted, or caused to be submitted, applications for numerous loans from the bank.

On more than ten occasions in 2008 and 2009, ANTONUCCI used CC-1′s private plane to fly for free to, among other places, Florida, Panama, Arizona (so that ANTONUCCI could attend the Super Bowl), and Augusta, Georgia (so that ANTONUCCI could attend the Masters golf tournament). All the while, ANTONUCCI approved over $8 million in overdrafts for the Oxygen-related entities’ various accounts at The Park Avenue Bank. On one occasion in 2009, when a check issued by an Oxygen-related entity bounced, CC-1 communicated to ANTONUCCI that he would not be allowed to use CC-1′s private plane.

The Fishkill Leases

ANTONUCCI also arranged for The Park Avenue Bank to improve, lease, and pay expenses for properties he personally owned. More specifically, over a period of years, ANTONUCCI had The Park Avenue Bank spend more than $1 million to improve, lease, and pay expenses for three properties in which he had an ownership interest: 1042 Main Street, 2 Broad Street, and 48 Jackson Street, all in Fishkill, New York. ANTONUCCI arranged for the bank to make these payments even though it had no legitimate need for two of the three properties.

Fraud Against The NYSBD, FDIC, And TARP

In addition to the corrupt conduct outlined above, ANTONUCCI is also charged with using his position at The Park Avenue Bank to defraud bank regulators by arranging a round-trip transaction designed to deceive the NYSBD and FDIC into believing that ANTONUCCI himself had invested approximately $6.5 million in the bank in an effort to improve its capital position. In truth and in fact, however, ANTONUCCI had fraudulently borrowed from the bank itself the funds that he purportedly invested. More specifically, at ANTONUCCI’s direction, The Park Avenue Bank “loaned” funds totaling $6.5 million to entities with which ANTONUCCI had relationships; those entities transferred the $6.5 million to accounts controlled by ANTONUCCI; and ANTONUCCI then re-deposited the $6.5 million into the bank—claiming he was investing his personal funds in order to recapitalize the bank—in exchange for 308,349 shares of common stock, which represented a 52 percent controlling interest in The Park Avenue Bank’s holding company.

In 2009, when the FDIC began investigating the source of the purported $6.5 million capital infusion, ANTONUCCI lied to FDIC regulators about the true nature of the transaction. ANTONUCCI also provided regulators with documents purporting to reflect that he obtained the $6.5 million from sales of stock, but those sales were actually sham deals designed to disguise the fact that the true source of the funds was The Park Avenue Bank itself.

ANTONUCCI also used the $6.5 million round-trip transaction to support an application for taxpayer rescue funds through TARP. Once again, the bank’s capital position was fraudulently misrepresented on its TARP application. Then, in telephone calls to FDIC regulators reviewing the bank’s TARP application, ANTONUCCI, in an effort to obtain more than $11 million in TARP funds, again falsely represented that he had made a substantial, personal capital contribution to The Park Avenue Bank.

ANTONUCCI also lied to the public about the true nature of the round-trip transaction. In a Park Avenue Bank press release issued February 13, 2009, ANTONUCCI was quoted as stating: “With this new round of capitalization from management, our application for additional capital from the Federal government’s economic stabilization programs [i.e., the TARP] as well as our formal agreement with the regulators to assure stability, service, and liquidity, The Park Avenue Bank is now well positioned to grow strongly in the coming months.”

When ANTONUCCI was advised by the FDIC that it would not recommend approval of The Park Avenue Bank’s TARP application, he withdrew the application voluntarily. During a subsequent interview, ANTONUCCI was quoted as claiming that the bank withdrew its TARP application because of “issues” with the TARP, and the desire to avoid “market perception” that “bad bank[s]” take TARP money. ANTONUCCI also stated: “[I]n conjunction with withdrawing the application, we are also putting additional capital in. The capital is coming primarily from myself and other members of my board. It is the insiders that are investing capital into the bank, so the message to the depositors is that at this point, I don’t need TARP money, I don’t necessarily want TARP money, we are a strong bank, and management is committed to putting capital in as it is needed.”

The Counterfeit Certificate Of Deposit

To conceal the $6.5 million round-trip transaction, ANTONUCCI created a counterfeit Certificate of Deposit (“CD”), in the amount of $2.3 million, purportedly issued by The Park Avenue Bank. More specifically, at ANTONUCCI’s direction, a portion of the $6.5 million borrowed from the Bank was first funneled through accounts associated with U.S. Insurance Group (“USIG”). USIG filed for bankruptcy in April 2009, and at the time listed on its balance sheets a $2.3 million loan from The Park Avenue Bank, which was, in truth and in fact, simply a portion of the $6.5 million round-trip transaction executed by ANTONUCCI to defraud bank regulators and the TARP.

To ensure that the sham nature of the round-trip transaction was not discovered, ANTONUCCI and his co-conspirators engaged in a series of transactions designed to repay the outstanding $2.3 million USIG loan using the funds of another bank depositor, General Employment Enterprise, Inc. (“GEE”). As part of these transactions, and to hide them from GEE’s auditors, ANTONUCCI caused the creation of a 90-day CD at The Park Avenue Bank which purported to represent a $2.3 million investment by GEE. In truth and in fact, however, there was no CD, and the $2.3 million was simply wire transferred from GEE’s account into an account controlled by ANTONUCCI. ANTONUCCI in turn used the money to pay off the outstanding USIG loan. Later, when GEE’s auditors requested a certification from The Park Avenue Bank that the CD existed, ANTONUCCI fraudulently signed such a certification, even though he knew that no CD in fact existed.

The Florida Investment Fraud Scheme

ANTONUCCI also is charged with a scheme to defraud the pastors of the Calvary Springs Chapel in Coral Springs, Florida, who were interested in obtaining investment income for the construction of a new church. ANTONUCCI’s co-conspirator (“CC- 4″) promised the pastors that if they invested $103,940 in the purchase of a bond, CC-4 would borrow up to four times that amount in foreign markets, and pay the pastors back the maturity value of the bond—$604,848—within two to three weeks.

CC-4 instructed the pastors to pay the $103,940 investment to an account at The Park Avenue Bank held in the name of Park Avenue Insurance. That account was in fact owned by ANTONUCCI. After a series of misrepresentations by ANTONUCCI and CC-4, the pastors never received the promised $604,848 return, or the return of their initial investment. Instead, ANTONUCCI and CC-4 simply divided the pastors’ $103,940 investment between themselves.

At approximately 5:00 PM on Friday, March 12, 2010, the NYSBD seized the offices, branches, and assets of The Park Avenue Bank. The FDIC was appointed receiver and will be administering the assets of the bank so as to protect the interests of the depositors. The FDIC has arranged for the sale of The Park Avenue Bank.