? Previously: The Federal Deposit Insurance Corp. issued an August 2009 report stating that Bank of Clark County staff had intentionally withheld current appraised values of some of the bank’s real estate loans.
? What’s new: The U.S. District Attorney has charged former executive David Kennelly in conspiring to hide the appraisals.
? What’s next: A federal district court today will schedule a hearing in Tacoma.
Former Bank of Clark County executive David Kennelly is facing a felony charge in connection with the failed bank’s record-keeping practices, according to federal documents filed Thursday in U.S. District Court in Tacoma.
Those documents indicate Kennelly kept information from regulators who were inquiring about the bank’s health.
? Previously: The Federal Deposit Insurance Corp. issued an August 2009 report stating that Bank of Clark County staff had intentionally withheld current appraised values of some of the bank's real estate loans.
? What's new: The U.S. District Attorney has charged former executive David Kennelly in conspiring to hide the appraisals.
? What's next: A federal district court today will schedule a hearing in Tacoma.
Kennelly was Bank of Clark County’s chief lending officer in charge of assessing the risk for the bank’s portfolio of real estate and development loans. He allegedly tried to “falsify, conceal and cover up” unfavorable real estate appraisals — worth less than the value of the loan — during examinations of the bank by state and federal banking regulators in the months leading up to the bank’s closure in January 2009, according to the court filing.
The U.S. Department of Justice has charged him with a “scheme to conceal material fact,” a type of criminal charge that indicates the defendant has been working with the government to resolve the case, said Emily Langlie, a Justice spokeswoman.
The penalties carried with the charge are unknown.
Kennelly was not immediately available for comment.
Neither can the U.S. District Attorney’s office comment on the specifics of the case until after its initial hearing, said Langlie. The court today will set a hearing date for the case.
The Washington Department of Financial Institutions didn’t return calls seeking comment.
No other Bank of Clark County executives have been charged, and the Department of Justice doesn’t have any other outstanding cases related to the bank at this time, said Langlie.
Former bank employees who asked to remain anonymous were shocked that Kennelly was the only executive to be named.
Court documents also refer to an unnamed former employee, “K.B,” who allegedly assisted Kennelly in hiding the appraisals.
Former board members have anticipated for some time that at least one lawsuit would result from the bank’s closure. Many have refused to comment on stories related to the bank’s closure, citing the potential for future charges.
“Anybody in business is always concerned about those things,” said Arch Miller, founder of the International Air and Hospitality Academy in Vancouver and a founding director and board member of Bank of Clark County. Miller declined to comment further on the charges against Kennelly.
Not new
Federal and state regulators have alleged for many months that bank managers didn’t provide all of the correct information in examinations needed to properly analyze the bank’s financial condition.
As a result, regulators didn’t require the bank to increase its allowance for loan and lease losses as much as the correct appraisals would have required. Such an action may have helped prevent the bank’s failure, according to an August 2009 audit by the Federal Deposit Insurance Corp.’s Office of Inspector General.
With Thursday’s court filing, it appears that federal regulators hold Kennelly accountable for the omissions.
Kennelly allegedly told BOCC employees not to disclose a spreadsheet of appraisals that had lost significant value to state and federal regulators in a safety and soundness examination in November 2008, according to the court filing. He also allegedly told employees not to place hard copies of the appraisals in the bank’s files or its electronic records system until after the examination was complete.
Then, in a Nov. 3 examination interview, Kennelly allegedly told bank regulators that all the documents had been scanned.
On Nov. 18, when Kennelly learned that regulators knew of the missing appraisals, he allegedly told “K.B” to leave the bank and instructed “K.B” to say the appraisals weren’t provided to regulators because the staff was too busy to scan them into the system.
The court filing also provides some insight into Kennelly’s departure from the bank. That November, Cirith Anderson-Sebree was promoted to vice president and risk and compliance manager in the Bank of Clark County’s finance department, according to a January 2009 story in The Columbian.
Laura McVicker and Cami Joner contributed to the reporting of this story.
