Two former executives of Sonoma Valley Bank have been indicted for their alleged involvement in a $9.5 million fraud scheme.
The executives charged are Sean Cutting, the former president and chief executive officer, and Brain Melland, chief lending officer at the now-defunct Sonoma Valley. Additionally, real estate developer Bijan Madjlessi and his attorney, David Lonich, were charged in the alleged scheme. The indictments against the four individuals were filed by Christy Romero, the Special Inspector General for the Troubled Asset Relief Program, of which Sonoma Valley was a participant.
None of the defendants could be reached for comment.
Cutting, Sonoma Valley's former CEO, is accused of producing letters on the bank's letterhead falsely stating that a straw buyer had sufficient funds at the bank to obtain a $9.5 million loan. Mandjlessi, the borrower,T was intending to use the loan to regain control of residential units of the Park Lane Villas East real estate project in Santa Rosa, Calif.
Ultimately, Madjlessi and Lonich obtained the $9.5 million loan from Sonoma Valley, which helped them regain title to Park Lane Villas East, the indictment says. The indictment alleges that Cutting helped Mandjlessi to obtain the loan even, despite the fact that he'd previously defaulted on a $30 million construction loan from another bank for the Park Lane project.
This fraud occurred in 2009, the indictment claims, shortly after Sonoma Valley received approximately $8.6 million in TARP funds. A year later, Sonoma was shut down and placed in receivership under the FDIC.
In January 2013 the FDIC barred Cutting and Melland from working in the banking industry on the grounds that they had engaged in "reckless unsafe or unsound banking practices."
The federal charges against the defendants include conspiracy, bank fraud, wire fraud, money laundering, making false statements to a bank, false bank entries and attempted obstruction of justice. The four defendants face sentences from five to 30 years in prison.
The defendants next hearing is scheduled for U.S. District Court for the Northern District Court of California on April 18.
Evan Nemeroff is a reporter for Mortgage Servicing News Managing REO.
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