by Mark Millican
Former Ellijay banker Adam Teague was sentenced to almost six years in prison April 5 for his role in defrauding the bank he worked for, according to a U.S. Department of Justice news release.
Teague, 39, was sentenced by U.S. District Judge Richard W. Story to five years and 10 months in federal prison, five years of supervised probation upon his release and was ordered to pay more than $5.8 million in restitution, said Assistant U.S. Attorney Russell Phillips.
Phillips said Story sentenced Teague on the “low end” of the sentencing guidelines.
Teague, who was a vice president and senior credit officer at Appalachian Community Bank — which was forced to close by federal regulators on March 19, 2010, with the Federal Deposit Insurance Corp. (FDIC) appointed as receiver — pleaded guilty to one count of conspiracy to commit bank fraud in August.
“He pled guilty to a criminal information, which is the name that’s used when somebody is not indicted,” Phillips said of the bank fraud charge. “In other words, he agreed to come in and plead guilty before he was indicted by a grand jury. So he waived indictment and pled guilty to the information.”
The FDIC was the only financial entity in court for Teague’s sentencing, Phillips reported.
“(They) insured Appalachian Community Bank, and when ACB failed the FDIC took over as receiver,” he said. “So now the FDIC stands in place of Appalachian Community Bank, so they incurred the financial loss of more than $400 million for that bank.”
Teague did not immediately return a phone call on the day before his April 5 court appearance.
Appalachian Community Bank was acquired by Community & Southern Bank on March 19, 2010, according to Bloomberg Businessweek.
Another former ACB officer, William R. “Rusty” Beamon Jr., pleaded not guilty in early March to defrauding the bank using a real estate scheme, court officers said. Beamon, 52, of DeKalb County, is charged with six counts of bank fraud, said Phillips.
“(Beamon) was indicted approximately a month ago,” Phillips said last week. “A lot of procedural things will have to be done before that goes to trial.”
Phillips was asked what Story said when he handed down Teague’s sentence.
“Nothing that was newsworthy, in my opinion,” he replied. “In all sentencing, the judge listens to the objections, if any, to the pre-sentence report, and then he makes rulings on the objections. After he calculates the sentencing guidelines . He is given a sentencing range and he’s free to sentence anywhere in that range, or above it or below it if he chooses to. He has complete discretion to do that. In this case, he sentenced the defendant Teague at the low end of the adjusted guideline range, which was 70 months.”
Phillips said the pre-sentence probe is common.
“A probation officer did a pre-sentence investigation report, that’s standard procedure as soon as either someone is convicted at trial or they plead guilty,” he explained. “Probation does a PSI report and provides that information to the court to help the judge make the right decision.”
David Hopkins, who marketed some of the properties through his real estate website, The Mountain Voice, said he turned over documentation on Teague and Beamon to the FBI and FDIC when he became suspicious.
“I thought he got off light,” Hopkins said, agreeing with Phillips’ “low end” sentencing assessment. “It seemed to be a concerted money making effort. I know that Rusty and Adam and the rest of these guys said they were trying to help the bank (saying) we had these properties that were not performing and we were trying to save the bank. Well, that’s not the picture that I (saw) whatsoever ... I thought they were going after this intentionally, knowing darn well what they were trying to do. It had nothing to do with saving the bank — I think that’s a bunch of cock-and-bull.”
Release: How it went down
Following is a release from the U.S. Department of Justice, Northern District of Georgia:
Former bank vice president Adam Teague was sentenced today to serve over five years in federal prison for conspiring to defraud Appalachian Community Bank.
“Bank fraud is a critical problem throughout the United States, but it has hit Georgia especially hard,” said U. S. Attorney Sally Quillian Yates. “Our state has led the nation in bank failures since 2008, with 85 banks failing — including this one. This bank was robbed from the inside, not by a bandit carrying a gun, but a bank officer carrying a pen.”
Mark F. Giuliano, special agent in charge, FBI Atlanta Field Office, stated: “Today’s sentencing of Mr. Teague should serve as a stark reminder to others that such greed based criminal behavior as seen in this case comes with a cost. Understanding the potential impact on the banking institution itself, the FBI will continue to dedicate extensive investigative resources toward addressing bank fraud in its many and varied forms.”
“Teague contributed to the failure of TARP-applicant Appalachian Community Bank by fraudulently masking the bank’s true financial condition while enriching himself,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “Driven by greed and risky behavior, Teague engaged in an ‘extend and pretend’ scheme using the proceeds of new bank loans to hide past-due
loans. He also hid the bank’s growing inventory of foreclosed property by directing the bank to finance sales of the properties to buyers including two Teague-controlled shell companies, GPH (“God Please Help”) Investments and PHL (“Please Help Lord”) Investments. SIGTARP and our law enforcement partners will root-out fraud related to TARP, hold fraudsters accountable, and bring justice to American taxpayers.”
According to Yates, the charges and other information presented in court, Teague was senior vice president of Appalachian Community Bank, which was headquartered in Ellijay. Due to its poor financial condition, Appalachian was forced to close March 19, 2010, and the FDIC was appointed as receiver. The investigation of Appalachian’s loan transactions uncovered extensive fraudulent activity in which Teague was involved, the release continued:
Concealment of past-due loans
In an attempt to prevent the FDIC from discovering certain past-due loans on Appalachian’s books, between June 2008 and August 2009, Teague and (an unindicted coconspirator) arranged a number of sham real estate transactions and caused the bank to make approximately $7 million in fraudulent loans to (unindicted coconspirators) intended to make it appear as if (unindicted coconspirator) had purchased certain properties from Appalachian’s foreclosure inventory and was making regular monthly payments on the new mortgages.
Panama City Beach condominiums
In April 2009, Teague and (an unindicted coconspirator) used shell corporations to purchase two condominiums in Panama City Beach, Fla. and caused Appalachian to finance them at a total cost of approximately $566,000. Approximately two months later, the two refinanced their mortgages and pocketed more than $875,000 which they then used to pay other personal debts, make monthly loan payments on the refinanced mortgages, pay condominium fees, and purchase new furniture for their condominiums.
‘God Please Help’ and ‘Please Help Lord’ investment LLCs set up
In August 2009, Teague and (an unindicted coconspirator) created two shell companies: GPH Investments, LLC and PHL Investments, LLC. GPH is an acronym for “God Please Help,” and PHL is an acronym for “Please Help Lord.” Teague and (unindicted coconspirator) then engaged in a sham real estate transaction designed to make it appear as if GPH had purchased 11 residential properties from Appalachian’s foreclosure inventory for a total of approximately $3.7 million.
Teague and (unindicted coconspirator) then caused Appalachian to loan GPH 90 percent of the purchase price and caused GPH to represent at closing that it was paying the other 10 percent of the purchase price out of its own funds, even though the two of them knew that to be untrue. The 10 percent down payment, closing costs, and monthly interest payments on this loan were all paid out of the proceeds from a $500,000 line of credit that Teague and (unindicted coconspirator) fraudulently caused Appalachian to extend to PHL.
Soak Creek Preserve Partners land flips
Teague and three other individuals owned Soak Creek Preserve Partners, LLC (Soak Creek), a Georgia limited liability company formed for the sole purpose of engaging land flips, that is, buying real estate and immediately reselling it at a higher price. Specifically, Soak Creek was formed to purchase and resell two adjoining tracts of land in Tennessee.
One tract consisted of approximately 5,043 acres and the other tract consisted of approximately 2,160 acres. Before Soak Creek purchased either tract, Teague and his partners made arrangements to resell both tracts to an investment group from Texas. Teague then caused Appalachian to make three separate $100,000 loans to (an unindicted coconspirator) under false pretenses between March 7 and Sept. 4, 2007. Teague knew that (unindicted coconspirator) was a silent partner in Soak Creek. He also knew that in obtaining these loans from the bank, (unindicted coconspirator) was acting as a straw borrower for Soak Creek.
‘Did not disclose’
And Teague also knew that Soak Creek intended to use the proceeds of these loans as down payments on the 5,043 acres and the 2,160 acres. But Teague did not disclose any of these facts to Appalachian Community Bank. In fact, he actively hid his involvement in at least one of these loan transactions by altering the bank’s records to make it appear that someone else had
acted as the loan officer. By not disclosing to Appalachian’s loan committee that he had a personal financial interest in these transactions, Teague violated the bank’s conflict-of-interest policy.
To finance Soak Creek’s purchase of the 5,043 acres, on April 20, 2007, Teague caused Appalachian to wire transfer approximately $7.2 million of the bank’s money to the escrow account of the Tennessee law firm that handled the loan closing. He did not record this wire transfer in the bank’s books and records.
At the time of this transfer, Soak Creek’s account at Appalachian had a zero balance. Therefore, this wire transfer caused Soak Creek’s account to be overdrawn by approximately $7.2 million. The amount of this overdraft exceeded Teague’s lending authority at the bank.
‘Same-day profit of approximately $2 million’
On April 24, 2007, Soak Creek flipped the 5,043 acres to the Texas investment group for approximately $9.3 million, thereby realizing a same-day profit of approximately $2 million. To finance Soak Creek’s purchase of the 2,160 acres, on Sept. 28, 2007, Teague caused Appalachian to wire transfer approximately $3 million of the bank’s money to the escrow account of the Tennessee law firm that handled the loan closing. He also did not record this wire transfer in Appalachian’s books and records. At the time of this wire transfer, there was only $4 in Soak Creek’s account at the bank. The wire transfer caused Soak Creek’s account to be overdrawn by approximately $3 million. The amount of this overdraft exceeded Teague’s lending authority at the bank.
On Sept. 28, 2007, Soak Creek flipped the 2,160 acres to the Texas investment group for approximately $3.7 million, thereby realizing a same-day profit of approximately $500,000.
Teague was ordered to forfeit $5,840,517.98, which is equal to the amount of the illegal proceeds he obtained as a result of the conspiracy, as well as all of the real property that he purchased with the proceeds of the conspiracy.
This case was investigated by the FBI, the FDIC, Office of Inspector General, the Department of Treasury, Special Inspector General/TARP and the Federal Housing Finance Agency/Office of Inspector General.
Phillips and Assistant U. S. Attorney Mike Brown prosecuted the case.