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Former Bank of Oswego executive pleads guilty to conspiracy charges

Geoff Walsh accepts plea deal, admits role in scheme to hide bad loans from regulators


WALSHFormer Bank of Oswego executive Geoff Walsh agreed to a plea deal last week that could connect his former employer to a complex scheme to hide bad loans from federal regulators.

Walsh, who served as the bank’s senior vice president of lending until he was fired in May 2012, was scheduled to stand trial July 28 on 32 criminal charges stemming from activities unrelated to his time at the Lake Oswego financial institution.

Prosecutors claimed Walsh worked with his brother, Greg, to defraud an Arizona investor of more than $3 million in 2011 through a condominium-flipping scheme. He had previously pleaded not guilty to all charges, which included wire fraud and conspiracy.

But through a plea agreement with the U.S. Attorney’s Office, Walsh reversed course July 22, pleading guilty to two of the charges — one count of conspiracy to commit wire fraud and one count of wire fraud. He also pleaded guilty to a new charge — conspiracy to commit making false entries in bank records — which could implicate the bank itself in criminal activity.

Walsh admitted to conspiring with other bank officers in 2011 to falsify quarterly reports in an effort to conceal mortgage losses from the Federal Deposit Insurance Corporation and avoid risking the regulatory impact of a downgrade in the bank’s credit status.

The convoluted scheme centers on a property at 952 A Ave., for which the Bank of Oswego provided a secondary mortgage loan. When the property was due to go into foreclosure around October 2010, the bank stood to lose just over $99,000 — a loss that, if reported to the FDIC, would have lowered the bank’s credit worthiness and rating.

Having secured a potential buyer, the bank attempted to purchase the first mortgage note from Citibank, but was told the property could only be sold to an individual, not an institution. Walsh admitted that in response, he and his “co-conspirators” at the bank then redirected $267,000 in Bank of Oswego funds to a bank employee, who purchased the property and then transferred ownership to the bank. The bank then quickly sold the property to another buyer for $355,000.

Walsh admitted to knowing that his colleagues made materially false statements about the transactions on call reports submitted to the FDIC.

In a separate but related case, prosecutors have alleged that Dan Heine, the bank’s former CEO, and Diana Yates, the former chief financial officer, also were involved in the scheme to hide bad loans from the bank’s board of directors, shareholders and regulators in an effort to portray the bank’s financial condition as much better than it was.

Yates, who was also at the federal courthouse for a hearing Wednesday, crossed paths with Walsh as they left the courtroom. Heine, who lives in Florida and is dealing with medical issues, did not return to Portland. His attorney entered not-guilty pleas for him.

Yates and Heine are tentatively scheduled to stand trial Sept. 18 on 27 charges that include conspiracy to commit bank fraud and making false bank entries. If convicted, Yates and Heine face a maximum of 30 years in prison for each count, as well as the forfeiture of any money or property obtained as a result of the violations.

Walsh is scheduled to be sentenced in his case on Nov. 9. Each charge carries a maximum sentence of 20 years in prison, a fine of $250,000 and three years of supervised release.

In exchange for Walsh’s guilty pleas, the U.S. Attorney’s Office agreed to drop all other charges against him and assured him that no further charges would be brought in association with the ongoing investigation of The Bank of Oswego.

U.S. District Court Judge Michael Simon reminded Walsh that by entering the pleas, he would be ineligible for parole and would be prohibited from working in any financial institution. Simon also said he would require Walsh to pay up to $4 million in restitution.

Greg Walsh waived his right to appear in court; his trial is scheduled for January 2016. None of the four defendants is currently in custody.

Contact Saundra Sorenson at 503-636-1281 ext. 107 or ssorenson@lakeoswegoreview.com.

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