Greenwich bankers, from once publicly traded USA Bank, are under criminal investigation for their role in lending abuse and possible securities violations. I detailed in an investigative report last week at Dealflow’s The Distressed Debt Report how Fred DeCaro Jr. and his son were allegedly allowed to violate the business plan that earned them a FDIC approval for years before they were seized on July 9th, 2010. Now we learn the bank’s founding president, Peter Keller of New Canaan, CT, backed out of whistle blowing with another board member, at the last minute because he was afraid of the DeCaro’s retaliation.
According to The Distressed Debt Report, one of the founding investors and board members, Sal Pane, went to the FDIC within the first year of bank operations (September 2006) with documented evidence of lending abuse and securities violations. We now learn according to Maurizio Carusone, a founding investor, and Sal Pane that Peter Keller and the banks V.P. of residential lending Tom Calabro, agreed to go with Pane for his whistle blower interview. They all met the night before to talk about their testimony but Pane says at around 9 a.m. ,while waiting outside the FDIC office, he received a message from Keller that he was backing out.
“Peter said I can’t, I’m sorry but you have more money than me and I can’t afford a lawsuit by DeCaro,” according to Pane.
Pane ended up attending the meeting as the sole board member (with his attorney) and brought with him 17 boxes of documents detailing bank fraud and securities violations. Still, it took the FDIC over a year to issue their first cease and desist order. A move that forced DeCaro Jr. out as chairman but allowed the bank to put his son Fred DeCaro III, with no banking experience, in to replace him. It’s unclear how much opperationally changed after the C&D. DeCaro Jr. was eventually fined $125,000 and Keller only $1,500 in mid-2008 but by then Keller had moved on to secure a job as Vice President of Retail Sales for another publicly traded community bank – The Bank of New Canaan.
According to an April 2006 proxy statement sent to shareholders, Keller was paid $117,769 plus an additional $100,000 consulting fee for services rendered in 2005 prior to the approval of the Bank’s organization certificate. Of the five people paid for services involved in founding USA Bank Keller received the highest payout. The proxy statement also shows he received the 2nd lowest amount of shares, 20,000, issued to founding board members. Keller’s salary, as President of the bank was $180,000 a year; equal to that of the Chairman Fred DeCaro Jr.
Keller did not return emails to his work and phone calls to his home for comment.
Investors in USA bank say Keller was lucky to get a bank license from Connecticut’s banking commissioner after his time at USA Bank; his FDIC fine was one of the smallest of all the board members. But according to his LinkedIn profile and publicly filed bank documents he was never made a member of the board at New Canaan Bank and took a lesser position. After three years, Keller left Bank of New Canaan, this April for undisclosed reasons, to do a similar job at First Niagara Bank. His LinkedIn profile omits his work at USA Bank.
Pane did sue USA Bank and DeCaro Jr. after he resigned as a non paid board member in November 2006. Court documents show he’d been granted discovery from USA Bank and depositions of DeCaro; he beat the Bank’s motion to dismiss. But after the FDIC seized the bank, in July 2010, his legal claims against USA Bank became null. Pane can still sue DeCaro Jr. personally and his attorney said that’s the game plan.
According to my story in The Distressed Debt Report, Keller was not named as a person of interest in the FDIC investigations but then I haven’t interviewed every single person the FDIC has. No charges have been filed yet against any of the executives or board of directors of failed USA Bank. The FDIC said they don’t comment on active investigations.
You can buy a single copy of my investigation at DealFlow Media here.
UPDATE 5-31-11: Peter Keller has finally written back to say he has no comment on USA Bank.
This case is just the tip of the iceberg. Many internal bank frauds may never see the light of day. The rest of the story: predatory lending, foreclosures “at will” by bank foreclosure lawyers to line their own pockets and the pockets of their banker bosses, verbal fraud and schemes designed to force people into personal bankruptcy to make it impossible for them to sue, etc.
A good look at the commercial real estate foreclosures at certain big regional banks is warranted, but finding a whistle blower who will testify is difficult; they simply leave the bank because they “have differences with the bank,” and move on.
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