Former Wilmington Trust Executives Sentenced To Six Years In Prison

Yesterday, David Weiss, United States Attorney for the District of Delaware released the following statement regarding the sentencing of two former Wilmington Trust executives. Robert Harra, former president of Wilmington Trust and David Gibson, former chief financial officer.

Both were sentenced to six years in federal prison, pending their appeals, on Monday for their roles in shielding hundreds of millions of dollars worth of  bad loans from investors and regulators, according to prosecutors.

“The downfall of Wilmington Trust is a tragedy. It’s a tragedy to the over 700 employees who lost their jobs as a result of the Bank’s fire-sale acquisition by M&T. It’s a tragedy to those former employees who built the Bank into something to be proud of over the last century. It’s a tragedy to this Community, which lost what was thought to be a stable employer and a gold-standard financial institution. And it didn’t have to be.

Banks are entrusted with a fiduciary responsibility to safeguard their depositors’ funds. That is one of the primary reasons they are required to regularly file financial disclosures with the regulators responsible for ensuring the safety and soundness of those banks. Similarly, a publicly traded company is required to make certain disclosures to the investing public. Regulators and the public look to these filings to make informed decisions. In so doing, they have an absolute right to expect that the financial information disclosed is accurate. To function effectively, both our regulatory system and our free market system demand it. And the law requires it.

WTC’s 2009 filings with the SEC and the Federal Reserve were false. The Bank’s certified submissions grossly understated the quantity of past due loans on WTC’s books and thereby misled regulators and the public about the financial health of WTC’s portfolio. In particular, the 2009 year-end filings failed to disclose that the Bank had waived 300M in loans more than 90 days past due, and had mass extended another 800M in commercial loans without the proper due diligence. At the same time, the Bank went to the market and asked investors for $287MM in additional capital.

Robert Harra, as WTC’s President and Chief Operations Officer, established an aggressive sales culture that ignored sound risk assessment in commercial real estate lending. As the economy turned, these practices came home to roost. But rather than acknowledge the inability of these borrowers to repay their loans, Harra embraced the waiver practice as a means of concealing the trouble faced by the Bank.

David Gibson, as the Bank’s Chief Financial Officer, was the ultimate decision-maker on financial reporting. He knew about the true condition of the commercial loan portfolio— the hundreds of millions of dollars in past due loans that were not included in the 2009 filings with the SEC and Federal Reserve. Nonetheless, he certified the Bank’s financials as accurate and overstated the health of the loan portfolio while marketing the stock offering to the investing public.

These actions do not define the defendants’ lives. As you’ve heard, they were successful and productive both professionally and personally. They are supported by their family, friends, and members of our community whose lives they impacted in positive ways. But, they did violate the law. They committed serious federal crimes and failed in their responsibilities to the Bank, its employees, and shareholders. Justice demands accountability.

Ultimately, this case, like many other prosecutions is about the human cost of defendants’ actions—the 700 WTC employees who lost their jobs, the shareholders who lost their investments, and in some instances their life savings, the defendants’ families, and a community that lost a bank that had been a proud and successful institution for decades.’

Staff Writer

First State Update's Delaware editorial team covers New Castle County, Kent County and Sussex County breaking news, political news, and general news stories. We bring the reader the latest news from the Wilmington, Newark, Dover, Rehoboth Beach and all point in between. If you have news to share, email us at desk@firststateupdate.com.