Three former executives of the Federal Home Loan Bank in Dallas – including its ex-president – have pleaded guilty to charges that they conspired to make false statements and filed bogus reimbursement requests to the government-sponsored mortgage lender in a $1.2 million fraudulent scam.
FHLB-Dallas former President Terence Carlyle Smith and bank Chief Information Officer Nancy B. Parker were in the middle of their federal criminal trials when they agreed to plead guilty to conspiracy to lie to the institution that employed them.
Federal prosecutors in Dallas claimed that Smith, Parker and former FHLB-Dallas Chief Financial Officer Michael Sims, who pleaded guilty prior to trial, filed 30 fake travel reimbursement claims for $780,000 that they claimed were for business but were actually personal pleasure trips to Las Vegas, Amelia Island, San Diego and Coronado.
In addition, prosecutors charged that the trio fraudulently petitioned the FHLB for $450,000 in unused vacation time reimbursements.
Parker pleaded guilty Tuesday after six days of trial before U.S. District Judge Jane Boyle. Smith did the same last Friday. Three weeks before trial, Sims pleaded to concealing knowledge of the actual commission of a felony.
Smith and Parker face up to five years in federal prison. Smith agreed to pay $4.2 million to cover the costs of attorneys’ fees incurred by the bank and its insurance carrier. Smith will pay just about $227,900. Sims is looking at up to three years in federal prison and will also be required to pay restitution.
“These defendants attempted to trick a Federal Home Loan Bank into footing the bill for their exorbitant personal travel,” U.S. Attorney Erin Nealy Cox said in a written statement. “We believe they were right to plead guilty, even at this late date, and are confident justice will be served at sentencing.”
Assistant U.S. Attorneys Errin Martin, Lindsey Beran and Tiffany Eggers led the government’s case against the defendants.
Court documents show that Smith and Parker admitted that they submitted dozens of false expense reports to FHLB between 2009 and 2013 claiming they went to professional conferences in Florida, California, and Nevada that they never attended.
“The actions of these defendants placed at risk the public’s trust in the Federal Home Loan Bank of Dallas,” Catherine Huber, special agent in charge of the FHFA-OIG’s central region office, said in a statement. “The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) is committed to investigating allegations of fraud committed against the government sponsored enterprises, including the 11 Federal Home Loan Banks.”
Dallas white-collar criminal defense attorneys Bob Webster and Thomas Petrowski, a long-time FBI agent in North Texas, represented Parker. Morgan, Lewis & Bockius attorneys Danny Ashby, Jeaneen Kappell, Steve Korotash, Justin Chapa, Megan Renee Whisler and David Monteiro were lawyers for Smith. Paul Coggins, Brendan Gaffney, and Kiprian Mendrygal at Locke Lord represented Sims.