A former top executive of a Lancaster County financing company was sentenced Tuesday to 15 years in federal prison for a wide-ranging fraud that toppled one of the nation's oldest local banks and put more than more than 300 Pennsylvanians out of work.
Joseph M. Braas, 46, spent two decades climbing the corporate ladder at Equipment Finance Inc., L.L.C., which helped arrange loans for logging and land-clearing operators, such as contractors enlisted for hurricane cleanups.
After reaching the top rung a decade ago, officials said, Braas oversaw a conspiracy to inflate the company's earnings. He and his employees propped it up -- and kept their jobs and yearly bonuses -- by hiding hundreds of defaulted or dubious loans and making up others to cover the deficits.
By the time auditors uncovered the scheme in 2007, Equipment Finance Inc.'s losses had ballooned to more than $53 million. The fraud toppled the small Lititz-based firm and its parent companies, the Bank of Lancaster County and Sterling Financial Corp.
"For six and a half years, [Braas] committed fraud after fraud that ultimately destroyed a business," U.S. District Court Judge Paul S. Diamond said before imposing the sentence at a hearing in Philadelphia.
Sterling, a publicly traded company, took a $200 million write-off because of the fraud, and spent $20 million alone just to investigate it.
To survive, it closed the Bank of Lancaster County, whose charter dated to 1863, and arranged a merger with PNC Financial. More than 300 Sterling employees lost their jobs just as the economy was tanking.
Braas and his lawyer, Cory J. Miller, argued that what started as a legitimate effort by Braas to help struggling customers and his employees snowballed out of control.
"I also believed that I eventually could have fixed the problem," Braas told the judge.
Prosecutors and the judge were dubious.
Assistant U.S. Attorney Judy G. Smith called the case "essentially narcissism run amok." And Diamond noted that Braas collected $1.4 million in salary and bonuses during the scheme -- including $165,000 from a customer that the judge suggested was a kickback or bribe.
"I think the defendant is sorry he was caught -- I'm not sure the defendant is sorry for what he did," Diamond said.
A grand jury indicted Braas and seven others in November 2010. Within three weeks, he pleaded guilty conspiracy and mail fraud and agreed to cooperate against his codefendants. Most of the others have since pleaded guilty and are awaiting sentencing.
That willingness to cooperate did win Braas leniency: he had faced more than 30 years in prison under federal sentencing guidelines.
But Diamond rejected a request that Braas, a father to three teenage children, be allowed to self-report to prison.
He ordered him to begin serving his term immediately, and Braas was led from the courtroom in handcuffs.
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