News Column

Banker didn't read rules, but circulated them

May 3, 2014

By Chris Olwell, The News Herald, Panama City, Fla.



May 03--PANAMA CITY -- The former chief financial officer of a failed local bank did more than just violate the rules -- which he claimed he never even read -- of an FDIC program designed to help struggling banks; he circulated those rules to co-workers.

Assistant U.S. Attorney Gayle Littleton confronted Elwood "Woody" West Friday during her cross examination with emails that he sent containing links to details about the FDIC's Temporary Liquidity Guarantee Program (TLGP).

West said Thursday he never read the rules of the program, which the FDIC created to help stabilize the banking industry in autumn of 2008 as the financial system seemed on the brink of collapse.

West maintained it was an error that the bank took a guaranteed loan under the program, under which the FDIC guaranteed loans banks made to other banks under certain conditions, though he felt it was important to be sure his filings were accurate.

"I would think that every time you sent something to the FDIC you'd want to be 100 percent accurate, not just in certain situations," West said.

Apparently that's easier said than done. Littleton showed West documents with his signature under language stating that he was responsible for ensuring the representations were correct.

Nick Bornhoft, who considered West a mentor when he worked for him as a financial analyst, said West instilled in him the importance of accurate filings.

"He always stressed to me the importance of getting everything as accurate as possible," Bornhoft said.

West agreed that he was responsible for filing the form in error, and he wished it would've been accurate because he expected regulators to scrutinize each filing.

"I cannot remember, on December 4, what I was thinking when I filed that form," West said.

West was under a great deal of pressure at the time, defense attorneys asserted. FDIC was in the middle of an examination of Coastal's financial health that West already knew would not go well.

He said he remembered talking to examiners about his plan to seek funds under the TLGP, but he could not recall any specific details of the discussion.

After West's testimony, which began Thursday afternoon, several friends, a pastor and co-workers, as well as his wife and mother-n-law, testified that West is honest and trustworthy, and that if he said something under oath they would believe him. Some said they didn't believe he would ever lie.

West, the former CFO of Coastal Community Investments, the holding company that owned Coastal Community Bank in Panama City Beach and Bayside Savings in Port St. Joe, was indicted last summer on 12 felony counts for allegedly conspiring with CEO Terry Dubose and attorney Frank Baker to defraud the FDIC.

Documents presented during the trial, which will enter a third week when it resumes Tuesday, show several key errors and omissions that the government contends effectively hid the fact that Coastal didn't have the kind of debt that made them eligible for the TLGP.

When Coastal eventually defaulted on the $3.75 million loan, which the company needed to repay an unauthorized dividend payment, the FDIC repaid the principle plus interest.

West, Dubose and Baker have pleaded not guilty and argued during the trial that the errors were merely mistakes. They dispute any contention of a conspiracy or criminal intent.

Judge Richard Smoak assured jurors Friday that the trial was nearly complete.

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(c)2014 The News Herald (Panama City, Fla.)

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Source: News Herald (Panama City, FL)