Federal prosecutors have asked an appeals court to reconsider its January decision to overturn the fraud convictions of four former senior Wilmington Trust executives.
In January, the Philadelphia Federal Court of Appeals ordered acquittals on charges that bankers lied to investors and regulators about the amount of questionable commercial real estate loans held by the bank. He also quashed bankers’ convictions on two counts of conspiracy and securities fraud, leaving those charges open to a new trial.
In a case filed Thursday with the U.S. Court of Appeals, federal prosecutors argued they should be able to fire the bankers on most of the charges, which the appeals court handed down as ‘acquittals. They also said the court should have upheld the other two convictions for conspiracy and securities fraud.
The record signals that U.S. Attorney David Weiss is prepared to retry bankers on some or all of the charges after federal prosecutors spent several years getting the convictions overturned. A spokesperson for Weiss declined to comment on the filing.
The appeal court’s request for another argument is the latest turning point in a more than decadelong saga involving the once venerable institution of Wilmington.
Two years ago, a Delaware jury found former Wilmington Trust chairman Robert Harra Jr., former CFO David Gibson, former credit manager William North and former controller Kevyn Rakowski guilty of various crimes related to the non-disclosure of hundreds of millions of dollars in bad debts from regulators.
In December 2019, Harra and Gibson were sentenced to six years in prison. North was sentenced to four and a half years and Rakowski to three years. Richard G. Andrews, the federal judge who presided over the trial, granted the four executives a suspension of their prison terms pending their appeals.
At trial, prosecutors argued that the crimes contributed to the bank’s downfall. The bank’s assets and name were acquired by M&T Bank in an inflammatory sale in 2011, robbing shareholders of billions of dollars and cutting jobs for hundreds in Delaware.
Prosecutors said the bank kept “a second set of books” by conspiring to withhold information from regulators and investors about the bank’s true financial position from 2008. Specifically, the bankers were accused of failing to not disclose hundreds of millions of dollars in loans due on bonds. overdue reports to federal regulators.
Defense lawyers argued that the overdue term was ambiguous. Prosecutors argued that it was clearly defined and would have been clear to executives in 2010 when they sought out $ 287 million from investors with the failing bank without disclosing the extent of bad debts in the portfolio of the bank.
In overturning the bankers’ conviction, Cheryl Ann Krause, the appeals judge who drafted the January decision wrote that the government must prove that its interpretation of the overdue reporting requirement is the only “objectively reasonable” interpretation or that the accused’s statement was also false on another objectively reasonable interpretation.
“Because the government here has produced insufficient evidence from which a rational jury could find the defendants ‘statements false under this rule, we will overturn the defendants’ convictions for false statements,” Krause wrote.
Thursday’s filing challenges this new standard and argues that when a new standard is first applied, the appropriate solution is to allow prosecutors to meet that new standard in a new trial.
He also argues that the court should have upheld the convictions on the other charges instead of sending them back for a possible new trial.
Lawyers representing the bank’s executives did not respond to the appeal court’s latest filing.