Faith-Based Bank Execs Accused of Fraud

     ATLANTA, Ga. (CN) – Two former executives of a “faith-based bank” are accused of loaning more than $80 million to a hotel developer, despite knowing that he would spend the money on himself, including buying a $1.5 million private island in the Bahamas. The federal indictment accuses former Integrity Bank executives Douglas Ballard, 40, and Joseph Foster, 42, of awarding bogus loans to hotel developer Guy Mitchell, 50, of Coral Gables, Fla.

     Ballard and Foster loaned Mitchell millions of dollars for business purposes knowing that he would spend the money on himself, according to U.S. attorney Sally Yates.
     Mitchell allegedly bribed Ballard and Foster for leniency in the loans.     
     “These officers of Integrity Bank sure weren’t living up to the bank’s name,” Yates said in a statement. The bank was founded in 2000 on Christian principles and under the motto “In God We Trust.”
     “After passing out $80 million to the developer like it was Monopoly money, both officers dumped their Integrity stock before the failed loans came to light,” Yates said. “While the developer was living the good life, even buying a private island with Integrity’s money, and the bank’s senior loan officer was making huge commissions and taking payoffs from the developer, the bank was dying a slow death. The defendants were going to leave the bank’s shareholders and the FDIC holding the bag, but now they are being held accountable.”
     At the heart of the indictment are three loans totaling $20 million made in 2006, which were approved by Ballard, former exective vice president of the bank.
     At Mitchell’s request, Ballard helped him secure nearly $7 million construction loan that was supposed to be used at the Casa Madrona, a luxury hotel Mitchell owned in Sausalito, Calif. The hotel was to be converted into a condominium-hotel complex.
     But no construction or renovation was done, Yates said. She said the money was wired to Mitchell’s personal checking account. But Ballard allegedly told Integrity’s board of directors otherwise. Mitchell paid Ballard more than $200,000 in cash and other payments for this, and other business “opportunities,” according to the indictment.
     Yates says Mitchell was not expected to pay back much or any of the loan money. According to the indictment, with assistance of Integrity employees, Mitchell paid interest on his loans by taking draws or disbursements from other loans, borrowing more and more money — a total of $80 million — while making only interest payments.
     Integrity Bank reported that it had $1.1 billion in assets when it closed in 2008. Integrity’s five branches were taken over by Regions Bank.
     The three defendants are expected to be arraigned this week, Yates said.
     Aaron Danzig, who represents Ballard, and Ed Garland, who represents Mitchell, did not return calls seeking comment.

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