A federal grand jury has indicted ex-Bank of Oswego president and CEO Dan Heine and former CFO Diana Yates with running a widespread, five-year conspiracy to hide the Oregon-based bank’s troubled financial state from regulators. According to the indictments, the two of them authorized secret deals to conceal bad loans in the bank’s portfolio from the Federal Deposit Insurance Corp and its own board of directors.
According to the indictment, from September 2009 through last year, Yates and Hein conspired to defraud the bank. The reason for the allege conspiracy was to deceive its shareholders, board of directors, the public, and regulators by making the bank seem more financially robust.
Among their alleged acts:
• Using a bank employee to act as a straw man in a bogus real estate transaction.
• Having the bank make loans to a middleman. The latter would allegedly send loan proceeds to other beleaguered bank borrowers so that they could make their loan payments.
• Having the bank make loans and withdrawals from customer accounts without customer approval or knowledge.
• Mischaracterizing assets in reports to the Board and the FDIC, as well as making false entries in the report about the status of different loans and transactions.
• Hiding information about loans from bank insiders
Yates and Heine are charged with 26 counts of making false bank entries and one count conspiracy to commit bank fraud. Federal authorities arrested them last week. Heine and Yates both entered not guilty pleas to the charges.
Heine claims that another indicted party, Geoff Walsh, is the one responsible for the alleged wrongdoings. The ex-Bank of Oswego loan officer was fired from and later sued by the bank for fraud related to financial deals outside the bank. The government started investigating Bank Oswego after Walsh was indicted in 2013.