Former Wilmington Trust President Robert Harra was sentenced to six years in prison for misleading regulators about the bank’s portfolio of overdue loans in one of the few criminal cases tied to the 2008 recession.
Harra, 69, stood expressionless Monday as U.S. District Judge Richard Andrews in Wilmington, Del., handed down the sentence and ordered him to pay a $300,000 fine for conspiring to hide delinquent real estate loans and paint a false picture of the bank’s financial health.
The executive was among a tiny handful of high-ranking bank officials charged in connection with the crash of the U.S. real estate market a decade ago, which was sparked by problems with subprime mortgages.
Three others were also convicted. Jurors found Harra, along with David Gibson, Wilmington Trust’s ex-chief financial officer; William North, the ex-chief credit officer; and Kevyn Rakowski, the former controller, intended to dupe regulators and investors about the bank’s bad loans.
Gibson was also sentenced to six years in prison and ordered to pay a $300,000 fine. North and Rakowski are scheduled to go before the judge Dec. 19.
Harra’s and his lieutenants’ waivers of payment deadlines on faltering commercial real-estate loans amounted to “unbridled hubris,” Robert “Rocky” Kravetz, an assistant U.S. Attorney who prosecuted the case, told Andrews.
“They acted like they could run the bank anyway they wanted” and didn’t have to answer to the U.S. Federal Reserve or other financial watchdogs, Kravetz said. The government unsuccessfully pushed Andrews to send Harra away for eight years, saying the defendants’ actions contributed to the demise of a financial institution, founded more than 100 years ago by the DuPont family, that was a gold standard for the industry in the state.
Prosecutors originally charged Wilmington Trust itself with participating in the scheme to hide mounting past-due loans. But the government dropped the case against the bank after it agreed to pay $44 million in a civil settlement.
Wilmington Trust melted down despite a $330 million injection from the government’s Troubled Asset Relief Program and $287 million raised in a 2010 stock offering. The bank was later purchased by MT Bank Corp. for about $351 million in stock.
Michael Kelly, Harra’s lawyer, asked Andrews to give the ex-bank president probation so he could continue his extensive charitable works. Kelly vowed to appeal the conviction and punishment.
The loan scheme “wasn’t a crime that involved an evil mind, greed or self-profit,” Kelly said. Harra, a 40-year veteran of Wilmington Trust, was “trying to do all he could to help the bank,” during the economic downturn, he said.