Bank CEO Guilty of Multiple Fraud Offenses

A Florida federal court jury has found the former CEO of Hamilton Bank guilty of multiple fraud offenses arising from a scheme to inflate the value of the institution's stock.

Eduardo A. Masferrer was convicted on 16 counts of fraud in the U.S. District Court for the Southern District of Florida, according to an announcement by U.S. Attorney R. Alexander Acosta and Thomas C. McDade, special agent in charge with the Federal Deposit Insurance Corp.'s Office of Inspector General.

Masferrer previously served as the CEO and chairman of Hamilton Bank, a trade finance institution in Miami-Dade County, Fla., and its publicly traded holding company, Hamilton Bancorp.

Prosecutors explained that the charges arose after examiners from the Office of the Comptroller of the Currency found questionable transactions while examining Hamilton Bank's books and records in September 1999.

The transactions concerned the institution's participation in several asset swap deals in 1998 and 1999, according to the June 24, 2004, indictment. The deals involved the bank's sale of $20 million of distressed loans owed by Russian banks and the Russian government in exchange for the simultaneous purchase of $94 million of Latin American and other securities, the charges said.

Prosecutors asserted that the swaps were structured in a way that hid the bank's losses on the Russian loans and that Hamilton recorded the transactions on its books at inflated prices.

Following an investigation, the OCC determined the bank was operating in an unsafe and unsound manner and closed the institution in January 2002.

Criminal charges were subsequently filed against Masferrer, who allegedly conspired with other bank officers to fraudulently inflate the institution's reported income and earnings in 1998 and 1999 in order to hide significant losses.

The inflated income for 1998 also allowed Masferrer to improperly gain a large bonus because his rate of compensation was linked to the bank's financial performance, the charges said.

Masferrer was convicted of wire fraud, making false filings to bank regulatory agencies and the Securities and Exchange Commission, financial-institutions fraud, securities fraud, obstruction of a bank examination, obstruction by making false sworn statements, and conspiracy, Acosta said.

Masferrer, who faces up to 300 years in prison, will be sentenced by Judge K. Michael Moore July 26.