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Former school board member pleads guilty to $451,763 felony bank fraud

CROCKER, Mo. (July 23, 2011) — A former member of the Richland R-IV School Board and former banker pleaded guilty on Friday to a single count of Class B federal bank fraud accusing him of defrauding the Bank of Crocker of more than $450,000.

Troy W. Posten, 42, admitted in federal court to a variety of illegal activities from May 2004 to May 2008 at Bank of Crocker for which he could face a maximum penalty of 30 years in federal prison, a $1 million fine, and five years supervised release, along with a $100 mandatory special assessment.

“The essence of Posten’s scheme was that he fraudulently obtained funds from bank customers’ accounts, loans and lines of credit without their knowledge or approval,” according to the plea agreement signed by federal prosecutors, Posten, and Posten’s attorney, Scott McBride, with “the amount of the intended loss” calculated at $451,763.46 for federal sentencing guidelines.

Posten has requested a presentencing investigation and report; while the judge has some sentencing discretion, the plea agreement states that “restitution is mandatory,” with Bank of Crocker sustaining a loss of $224,615.44 and the bank’s bond company, Kansas Bankers Surety Company, sustaining a loss of $227,148.02, which is the amount the bonding company reimbursed the bank.

While Posten pleaded guilty to only a single count of bank fraud and only one Bank of Crocker customer was named in court documents, the plea agreement indicates that “the government believes the offense involved more than 10 victims.”

Posten served on the school board in Richland until April 2009; he didn’t file for re-election that year. He was no longer working at the Bank of Crocker when prosecutors acted against him: he had accepted a position as vice-president of First State Bank working as a loan officer in 2008.

According to a press release issued at that time by his new bank, as of 2008 he had more than 16 years of banking experience, was a 1987 graduate of Richland High School, and graduated from Missouri State University in 1991 with a bachelor’s degree in finance.

However, his problems in banking began early. According to court records in an unrelated case, Posten was hired by Boatmen’s Bank on Dec. 23, 1991, and initially worked as a collection representative; that bank lost an appeal of an auto repossession case in 1994 on the grounds that the judge didn’t believe Posten had provided the customer with adequate notification of default.

While it wasn’t widely known, Posten has been prohibited from participating in the banking industry since Nov. 10 of last year by a federal order to which Posten consented and which was issued by the Federal Deposit Insurance Corporation, commonly known as the FDIC. That consent agreement is posted here: http://www.fdic.gov/bank/individual/enforcement/2010-11-39.pdf

According to that federal order, “without admitting or denying any unsafe or unsound banking practices and any breaches of fiduciary duty,” Posten consented to the federal order by FDIC officials who reported that they had reason to believe that Posten “has engaged or participated in unsafe or unsound banking practices and breaches of fiduciary duty as an institution-affiliated party of the Bank of Crocker,” which, according to FDIC documents, “has suffered or will probably suffer financial loss or other damage.” FDIC officials reported that “the interests of the bank’s depositors have been or could be prejudiced, and (Posten) received financial gain or other benefit” from activities that “involve(d) personal dishonesty on the part of (Posten) and demonstrate (his) willful and continuing disregard for the safety or soundness of the bank.”

According to that November 2010 federal order, FDIC officials determined that Posten’s activities demonstrated his “unfitness to serve as a director, officer, person participating in the conduct of the affairs or as an institution-affiliated party” not only of the Bank of Crocker but also other depository institutions.

The details of Posten’s bank fraud aren’t included in the FDIC order, but are in a 14-page federal plea agreement.

According to court documents, Posten:

  • knowingly and intentionally made loans to unsuspecting borrowers of the bank and diverted the proceeds to his own personal accounts;
  • drew on existing bank customers lines of credit while making payments on his accounts, loans and personal credit cards;
  • issued cashier’s checks for deposit into his personal accounts for personal benefit prior to those checks being paid for; and
  • issued fraudulent letters of credit which the above mentioned financial institution had to guarantee.

 

While court documents say Posten’s problematic activities at the Bank of Crocker date back at least to May 2004, only one example is cited in detail. According to the plea agreement, Posten issued a cashier’s check on May 16, 2008, drawn on the Bank of Crocker and payable to First State Bank of St. Robert for $37,709.03, and two days later initiated a Bank of Crocker loan for the same amount in the name of a specified man with a stated purpose of “home finishing/consolidate,” with Posten signing his name as the loan officer. That man “did not authorize the transaction” and Posten acted without the man’s knowledge.

Posten deposited that cashier’s check at First State Bank of St. Robert the next day, using $30.709.03 to pay off a personal construction loan and $459.86 for a monthly car payment, with the remaining $6,540.14 deposited “into a checking account he used for the construction of his home.”

The activities of Posten at Bank of Crocker generated at least one other federal lawsuit.

On Aug. 8, 2008, GE Commercial Distribution Finance Corporation sued both Posten and the bank in federal court claiming that Posten had issued two lines of credit for $87,500 and $135,000 in the name of the bank. That case was voluntarily dismissed by request of GE Commercial Distribution Finance Corporation on Dec. 16, with that request granted the next day.

According to court documents in that case, “Posten was the vice president and agent of Bank of Crocker and had authority or, at a minimum, apparent authority to issue the First and Second Letters of Credit for the benefit of GE-CDF,” but “upon information and belief, Defendant Posten fraudulently, intentionally, and willfully issued the First and Second Letters of Credit without proper approval and in violation of his fiduciary obligations and other duties to act and deal in good faith with GE-CDF.”

The GE-CDF case involves a loss of $135,000 for GE-CDF based on a first line of credit issued to Ed’s Farm and Lawn on July 7, 2006 by the Bank of Crocker and a second line issued on July 27, 2007. When GE-CDF tried to collect on the line of credit on June 5, 2008, the Bank of Crocker’s attorney, Tyce Smith, responded on June 25 of that year that the line of credit “is a fraudulent document,” that “there exists no line of credit with that number at Bank of Crocker,” and “there is no underlying promissory note and (the bank’s) board of directors did not authorize any such line of credit.”

According to Smith’s letter, Posten “only possessed authority to make loans in the amount of $25,000 or less.”

Smith’s June 25, 2008 letter indicated that he intended “to file an action for declaratory judgment in the near future” asking “the court to determine the respective rights of the parties relative to the fraudulent line of credit.”

Smith did file a request for declaratory judgment on behalf of the Bank of Crocker against Troy Posten on June 2, 2009, but that case was dismissed on June 7 of this year following a request for voluntary dismissal filed by Smith on May 23 of this year.

Apart from the bank fraud allegations, the rest of Posten’s criminal and civil record appears mostly clear.

There are two exceptions, however: a Feb. 1, 2010 citation in Richland Municipal Court for failure to register a motor vehicle, for which Posten pleaded guilty and paid a $35 fine, and a Jan 1, 2005 judgment against him involving a $1,552.02 lien filed by the Missouri Division of Employment Security which was satisfied on March 21 of that year.

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