Politics

"Faith Based" Bank Fraud

By Anne Landman

U.S. prosecutors charged two former executives of a "faith-based" bank with conspiracy, bribery, bank fraud and securities fraud. The case involved $80 million in fraudulently-obtained loans that helped sink Integrity Bank of Alpharetta, Georgia. Integrity was founded in 2000 as a Christian bank; it's CEO started every business day praying with top officers, Bibles were stacked up in the boardroom and employees prayed with customers in bank lobbies. The bank's theme was "In God We Trust." In August, 2008, state regulators closed the bank in resulting in a draw of $235 million from the Federal Deposit Insurance Corporation's insurance fund. According to the indictment, Integrity customer Guy Mitchell, a hotel developer from Coral Gables, Florida, used false pretenses to obtain more than $80 million in loans from the bank. Mitchell then deposited almost $20 million of the loans in a personal checking account and spent the money on personal luxuries, including a private island in the Bahamas. Mitchell then allegedly paid the bank's executive vice president in charge of client relationships, Douglas Ballard (who also sat on the bank's board of directors) more than $230,000 in kickbacks for his role in the conspiracy. Ballard then sold more than $1 million of Integrity Bank stock based on insider information that shares were over-valued because of the fraudulent loans. According to a 2005 Time magazine article that discussed Integrity bank and its religious business model, businesses that advertise a religious affiliation are using a "clever branding strategy" that helps generate powerful customer loyalty.

Full post as published by PR Watch on May 10, 2010 (boomark / email).