Magazine article American Banker

Guilty Plea in Fraud That Left Banks with $80M in Risky Loans

Magazine article American Banker

Guilty Plea in Fraud That Left Banks with $80M in Risky Loans

Article excerpt

David Beyer, former president of defunct Sterling Resources Ltd., a home finance company, has pleaded guilty to bank fraud, bribery, and tax fraud conspiracy, a prosecutor said.

In a press release, the U.S. Attorney for the Eastern District of New York said Mr. Beyer's criminal activities in connection with home improvement loans he negotiated and sold to financial institutions left them holding at least $80 million of risky credits.

The U.S. attorney said that Sterling Resources, Garden City, N.Y, issued home improvement loans to low-income and elderly homeowners in cooperation with home improvement contractors, then sold the loans and securing mortgages to financial institutions by inflating the homeowners' income.

From 1987 to 1991, Sterling Resources sold about $120 million in loan packages to financial institutions, $80 million based on false applications, the U.S. attorney said.

The institutions include, Apple Bank, New York; Bank Atlantic, Fort Lauderdale, Fla.; Allied Irish Banks' First Maryland National Bank; First Tennessee Bank; Gateway Bank of Norwalk, Conn.; Goldome Bank, Buffalo; Bank-America Corp.'s Security Pacific Bank; and Sun State Savings and Low Association.

The prosecutor said Mr. Beyer and other Sterling employees told the contractors how much income the homeowners would qualify for loans. The contractors prepared the applications and financial documentation, including false federal income tax forms, in most cases without the homeowners' knowledge. …

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