A former chief executive of First Community Bank has been sentenced to two years in federal prison for running a mortgage-fraud scheme that cost the Hammond, La., bank millions.
Reginald Harper, who was also the $106 million-asset bank's president, and Troy Fouquet, a real estate developer, were sentenced for conspiracy to commit bank fraud on Thursday by a U.S. District Court judge in Washington, D.C. The men were also ordered to pay the bank more than $570,000 in restitution. Harper was sentenced to 24 months, while Fouquet received an 18-month sentence.
The scheme, which involved bad checks and straw loans, cost First Community $3.6 million, according to Cordell White, the bank's current president and CEO. The bank has recovered $2 million, excluding the court-ordered restitution, White said.
"I'm not real happy about that," White said. "It was not a good day for the bank."
In 2004, Harper loaned Fouquet more than $2 million on behalf of First Community to buy and develop land. When Fouquet had trouble repaying the loan, the men resorted to fraud to avoid reporting the delinquency. The court determined that Harper had recruited straw borrowers to take out loans from the bank, which were then used to repay earlier loans. Harper also falsified the bank's books to make it appear as though Fouquet had repaid the loans, resulting in a false call report with the Federal Deposit Insurance Corp.
"These were very sophisticated and complex transactions" involving 23 separate loans, White said.
First Community had received approval from the Treasury Department to receive $3.3 million through the Troubled Asset Relief Program, but the bank withdrew its application after discovering the fraud. The case was investigated by the Special Inspector General of the Troubled Asset Relief Program and the Federal Bureau of Investigations.
In January, First Community Bank
The scheme "caused significant losses to First Community Bank and jeopardized the bank's financial stability and ability to serve its community," Christy Romero, the special inspector general for Tarp, said in a press release. "SIGTARP and its law enforcement partners will bring accountability for TARP-related crimes."
