Magazine article American Banker

OCC Denies It Dawdled in W.Va. Bank Fraud Case

Magazine article American Banker

OCC Denies It Dawdled in W.Va. Bank Fraud Case

Article excerpt


The Office of the Comptroller of the Currency is defending itself against charges it should have acted sooner to rein in $1.1 billion-asset First National Bank of Keystone, W.Va., which was closed Wednesday amid charges of fraud.

Critics said the bank's balance sheets from the last several years revealed severe problems unrelated to any deception.

"There's more than fraud here," said Alexandria, Va., consultant Bert Ely, citing First National call reports which showed a concentration of high-risk, high-loan-to-value mortgages. "I have a feeling that the uninsured depositors have a basis for a lawsuit against the government."

OCC officials said they had been monitoring the fast-growing bank since mid-1997, when examiners discovered problems with its loan administration and accounting practices. A May 1998 enforcement action required the bank to hire an external auditor and file quarterly reports with the agency. In December, the agency imposed cash penalties on six First National directors.

OCC officials cited what they described as a hostile environment at the bank. The agency took the unusual step of asking federal marshals to escort agency examiners in and out of the bank this week.

But nothing, officials said, prepared examiners for the deception they discovered last week upon visiting two loan servicers -- Advanta of San Diego and Compulink Loan Service of Lansing, Mich.

According to an OCC official, records provided by the servicers showed that $515 million of loans the bank still claimed as assets were actually sold in 1997 and 1998. …

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