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Thursday, August 4, 2011
Arkansas Attorney Pleads Guilty to $47 Million Bank Fraud Scheme
LITTLE ROCK, AR—Kevin Harold Lewis, of Little Rock, Arkansas, pleaded guilty yesterday to one count of bank fraud, announced Christopher R. Thyer, U.S. Attorney for the Eastern District of Arkansas, and Valerie Parlave, Special Agent in Charge of the Little Rock Field Office of the FBI.
According to court documents, until around October 2010, Lewis, 43, a licensed attorney in the state of Arkansas, operated several businesses throughout the state in addition to running his law practice. Lewis primarily concentrated on developing property owners’ improvement districts and issuing special assessment bonds to fund these districts. These assessment bonds are also known as special improvement district bonds.
At the plea hearing held before U.S. District Judge James M. Moody, Lewis admitted that between Dec. 31, 2008, and Sept. 29, 2010, First Southern Bank, a federally insured financial institution located in Batesville, Ark., purchased special improvement district bonds, totaling approximately $23 million from Lewis. Prior to the purchase of each bond, Lewis would provide the bank with offering documents describing the details of bonds. At the plea hearing, Lewis acknowledged that these bonds were fraudulent. On or around August 2009, Lewis, through PA Alliance Trust, a trust he formed in February 2009, purchased a controlling interest, approximately 53 percent in First Southern Bank. To facilitate this purchase, Lewis borrowed approximately $4.6 million from First State Bank in Lonoke, Ark. Lewis pledged the First Southern Stock as collateral for this loan. In or around September 2010, Lewis, through his PA Alliance Trust, purchased an additional $5.5 million in First Southern stock, which increased his ownership in the bank to 64.9 percent. To facilitate this purchase, Lewis, in part, used funds from the sale of two fraudulent bonds to First Southern Bank.
In addition to the fraudulent bonds provided to First Southern Bank, a bank that was forced into FDIC receivership upon learning of the status of the bonds, the following financial institutions provided loans to Kevin Lewis which were collateralized, in whole or in part, by fraudulent bonds: Centennial Bank, Citizens, Liberty Bank, First Community, Allied, Simmons, and Regions Bank. The following banks currently hold fraudulent bonds which were originally sold by Kevin Lewis: Centennial Bank and Bank of Augusta.
The intended loss amount in this case is approximately $47 million
“This case demonstrates that the actions of one individual can have far-reaching, detrimental effects, including the collapse of a financial institution,” said U.S. Attorney Thyer. “The amount of fraud loss in this case is one of the highest in the history of our office. Fraud, whether of this magnitude or not, cannot be tolerated, and the Department of Justice will aggressively investigate and prosecute such schemes.”
“With each creation of a fraudulent bond, Mr. Lewis added to his house of cards that ultimately collapsed,” stated FBI Special Agent in Charge Parlave. “The FBI remains committed to rooting out such schemes, which threaten the stability of our financial institutions.”
The statutory penalty for bank fraud is not more than 30 years in prison and a fine of up to $1 million. Lewis remains free on his own recognizance pending sentencing, which will be set for a later date by the court.
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The investigation was conducted by the FBI and the Federal Deposit Insurance Corporation. It is being prosecuted by Assistant U.S. Attorneys Karen Whatley and Stephanie Mazzanti.