In a case of fraud against the US government, two men in eastern Pennsylvania were found guilty. The allegations were for fraudulent attempts to entice investors to put money into the parent company which they received from the bank, which would be classified as a circular lending scheme.
Background for the Case
The two men involved in the case are Brian Hartline and Barry Bekkedam. Hartline was the CEO of NOVA Bank and also its founder. Bekkedam was the board chairman before the bank ceased operations in 2012.
The allegation surrounds the idea that the two men encouraged investor George Levin to take money he was being advanced and turn around and invest it in the bank. The financial advisory company Allamor Capital Management LLC was the company that handled the advisement, which was owned by Bekkedam. The alleged story is that the financial advisor promised to encourage other investors to a fund that was managed by Levin in exchange for his investment.
At the time, the company was trying to raise funds as part of the federal requirement for assistance from the Troubled Asset Relief Program or TARP. Levin was one of three investors who were allegedly approached and ultimately invested with the company.
The alleged scheme made it look like the bank was receiving new money when in actuality is what their own funds being used. NOVA Bank was ultimately denied assistance through TARP and is now defunct. (NOVA Bank TARP Fraud Case Heading to Jurors)
Both Hartline and Bekkedam pled not guilty to the charges. The attorney for the US Department of Justice had a long list of witnesses to be interviewed in the trial. The defense maintains that there was no regulation or law against counting money from loans through the bank as capital. After deliberating for four days, the jury returned with a guilty verdict.
Both men plan to appeal the verdict, and they still maintain their innocence and put to what they perceive as a lack of evidence on the part of the US Department of Justice to show intent to commit fraud. (Jury Finds NOVA Bank Leaders Guilty in TARP Fraud Case)
The Impact for the Future
Anytime a fraud case occurs, it has major impact for the financial world and for consumers, especially in the real estate world. More regulations aimed at creating even more transparency in future investment transactions will be created. There will be a stronger need for full disclosure about potential conflicts of interest as in the case of Bekkedam’s financial advisory company and NOVA Bank.
In this case, the bank did not receive the funds. Had they been approved for them through the false investments, it would have meant that the relief money would have been used for a financial institution that was not considered solvent enough to receive them.
Whenever fraud occurs, it shines a light on how investments are handled in this country. As real estate is your largest and most important investment, the fraud done by others may cause you to have to jump through more hoops in the future. Luckily for you, however, The Power Is Now and I am here to help you navigate the rough terrain.
Bank regulations have increased in recent years as a result of the banking crisis, but it is apparent that more may be needed in the future to protect taxpayers and investors from being taken advantage of. Be sure to have a talk with your financial advisor about your bank’s policies and the federal policies for protecting your investments. Know the people and institutions you are working with. Fraud is everywhere. You have the power to protect yourself by working with people you know, and if it sounds too good to be true, then it usually is. The power is now!
As someone who has more than thirty-three years in the real estate and finance industry, I am ready to help you reach the next step, whatever that may be for you. Call me at 800-401-8994 x 703 or email me at firstname.lastname@example.org to talk about what your next step is in real estate and finance. Do it now, because your power is now!
Eric Lawrence Frazier, MBA
President and CEO