TARP fraud uncovered: Bank CEO pleads guilty in New York City

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TARP fraud uncovered: Bank CEO pleads guilty in New York City

The  ironies of TARP — the Troubled Assets Relief Program—may take decades to be understood. In the same manner of most great American financial crises, from the days of railroad bribery and trust-busting to world war munitions graft… claims of rights and wrongs are usually obscure. The October 2010 conviction of a white collar TARP criminal, however, suggest the days of reckoning for TARP may not be as long in coming as is historically usual.

Acting with unusual speed, federal officials went from closing a prominent New York City bank (March 12, 2010) to arresting its CEO and President at his home (March 15, 2010). The president and CEO of New York’s Park Avenue Bank, Charles J. Antonucci (59), this fall took a plea agreement with federal prosecutors. Antonucci admitted to taking more than $11 million illegally from TARP.

Antonucci’s guilty plea was the conclusion of the first prosecution of misappropriated TARP funds.

As with TARP’s national premises, Antonucci’s offenses also crossed state lines…literally and figuratively. What remains shrouded, however, is the extent to which federal prosecutors will use their discretion to pursue a potential slew of unindicted co-conspirators. Count Three in the complaint gives an inkling to the potential breadth of this problem, given recent revelations into how high flying banks have cozied up with influential customers:

Antonucci accepted bribes from customers of the Bank, including but not limited to over $250,000 in cash bribes, free use of a customer’s airplane, and free use of another customer’s luxury automobile, in exchange for Antonucci’s approval of various banking transactions. Indeed, on more than ten occasions in 2008 and 2009, Antonucci used a private plane owned by a co-conspirator (“CC-1”) to fly 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 on accounts for entities controlled by CC-1 at Park Avenue Bank.

One sophisticated and potentially aggressive component of the TARP program utilizes classic whistle blower techniques…meet the sleuth next door, SIGTARP. Though not a law enforcement agency, SITARP relies extensively on public input: and SIGTARP’s inspector has shown a  willingness to confront his peers at Treasury.

But critics have argued the enabling language of TARP may be  as guilty as Antonucci. Though in Antonucci’s case, obtaining a plea agreement was likely seen as being of the highest priority, subsequent prosecutions of TARP offenses may look toward fleshing out intent offenses under the legislation…making insider information, typically obtained best by whistle blowing, ever more vital. Whistle blowing for enforcing “intent” of TARP’s vague regulation will complicate the tasks of those given the responsibility of managing the language. And the police powers under TARP are already vague.

“Residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Treasury Secretary determines promotes financial market stability. And any other financial instrument that the Treasury Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.”

The vagueness of TARP’s language has led one important voice to attack the intention of TARP: and by implication, similar bailouts. According to Neil Barofsky, who serves as the Special Inspector General for TARP:

“Inadequate oversight and insufficient information about what companies are doing with the money leaves the program open to fraud, including conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.”

The Washington Post has reported (July 20, 2009) the Treasury Department refused to implement Barofsky’s recommendations to Congress for TARP reform. Instead, Treasury official insist, tracking TARP funds to banks is akin to tracking “water poured into the ocean.”

“TARP  and the Acronym of Trouble:  Good Rap, Bad Rap”  http://www.examiner.com/law-enforcement-in-national/tarp-fraud-uncovered-bank-ceo-pleads-guilty-new-york-city

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Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete our online form.