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Integrity Bank Execs Plead Guilty to Fraud Charges

10:30 AM, Jul 7, 2010   |    comments
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ATLANTA -- Two former officers of failed Integrity Bank pleaded guilty to fraud Tuesday.

Douglas Ballard, 40, pleaded guilty today in federal district court to one count of conspiracy to commit bank fraud and to receive bribes, and to one count of tax evasion, and Joseph Todd Foster, 42, pleaded guilty to securities fraud. They were senior vice presidents of Integrity Bank.

Integrity opened in 2000 and mushroomed to $1 billion in assets thanks to lending in Georgia's once white hot housing market. The bank trumpeted its Christian-based operating principles. It failed in August 2008.

Ballard, Foster and hotel developer Guy Mitchell were indicted in April, charged with bank fraud, conspiracy and bribery. Ballard is also charged with evasion of reporting requirements and securities fraud. Foster also faced securities fraud charges.

"Among the roots of our nation's financial crisis were criminal acts by bank insiders and major borrowers that contributed to the failures or bailouts of financial institutions previously believed to be secure," said U.S. Attorney Sally Quillian Yates in a statement. "Today we announce that two of these corrupt insiders here in Atlanta will be trading in their corporate offices for federal prison."

According to Yates, Ballard admitted that he conspired with Mitchell, the bank's major customer, to receive bribes from MitchelL and to assist Mitchell in receiving millions in loan draws under false pretenses. Ballard admitted in court to receiving over $200,000 in cash and other payments from Mitchell in exchange for Ballard's assistance in distributing millions of loan draws. During this same time, Ballard caused Integrity Bank to distribute nearly $20 million in loan proceeds to Mitchell's personal account, much of which was allegedly used for Mitchell's personal consumption (including the purchase of a private island in the Bahamas). Mitchell requested and Ballard paid nearly $7 million of these draws out of a construction loan relating specifically to supposed construction and renovation at the "Casa Madrona," a luxury hotel owned by Mitchell in Sausalito, Calif. The indictment alleges that none of this money was used for construction, and in fact no renovations had occurred.

Foster pleaded guilty to insider trading, having dumped his shares of Integrity stock based on his knowledge that the bank was facing an increasingly substantial but undisclosed risk that Mitchell would default on over $80 million in outstanding loans, according to Yates.

Ballard pleaded guilty to conspiracy and one additional new count of tax evasion. He could receive a maximum sentence of up to 10 years in prison and a fine of up to $500,000. Foster, who had been indicted on two counts of securities fraud, today pleaded guilty to one count. He could receive up to 20 years in prison and a fine of up to $5 million. A date for sentencing has not yet been set before United States District Judge Julie E. Carnes.

The investigation remains ongoing as to other potential misconduct relating to the failure of Integrity, Yates said.

(The Atlanta Business Chronicle)

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