Defense attacks prosecution case in bank execs fraud trial

Defense attorneys continued to hammer away Tuesday at prosecutors' claims in the federal fraud and conspiracy trial of four former Wilmington Trust Corporation executives, calling the government's star witness a liar.

In closing arguments, defense attorneys repeatedly attacked the credibility of Joseph Terranova, former manager of the bank's Delaware commercial real estate division.

Terranova is awaiting sentencing after pleading guilty to conspiracy to commit bank fraud and agreeing to testify against his former colleagues at Wilmington Trust — the only financial institution to be criminally charged in connection with the federal bank bailout program.

"He's a serial liar," said Kenneth Breen, an attorney representing former Wilmington Trust chief financial officer David Gibson.

Gibson and former bank president Robert V.A. Harra Jr., former chief credit officer William North, and former controller Kevyn Rakowski, are charged with fraud, conspiracy and making false statements to federal regulators.

Prosecutors allege that, in the wake of the 2008 financial crisis, the defendants concealed the truth about the bank's massive amount of past due commercial real estate loans from regulators and investors before the century-old institution was hastily sold in 2011.

The bank, founded by members of the DuPont family, imploded despite receiving $330 million from the federal government's Troubled Asset Relief Program. Before the fire sale to M&T Bank, Wilmington Trust raised $287 million in a 2010 stock offering while concealing the truth about its shaky financial condition to investors, prosecutors claim.

The bank itself was also named a defendant in the criminal case but reached a $60 million settlement with prosecutors last year just as a trial was to start.

Defense attorneys maintain that their clients did nothing wrong. They have repeatedly tried to brand Terranova as untrustworthy, saying he lied to his fellow bank employees and to federal investigators and acknowledged he had not been truthful with the jury in testimony regarding loan appraisals.

"You have to embrace the liar in order to convict these people. It's as simple as that," David Wilks, an attorney representing North, told jurors Tuesday.

Attorneys were to complete their closing arguments Wednesday morning before jurors receive final instructions from the judge and begin deliberating.

Prosecutors allege that Wilmington Trust concealed the quantity of past due loans on its books from October 2009 through November 2010. Authorities say Wilmington Trust failed to disclose to regulators its practice of "waiving" matured loans designated as current for interest and in the process of being extended from the reporting requirements for past due loans.

In the fourth quarter of 2009, for example, Wilmington Trust officials reported that only $10.8 million in commercial loans were 90 days or more past due, concealing more than $316 million in past due loans subject to the waiver practice, according to prosecutors.

Terranova and two other former Wilmington Trust officers, Delaware Market Officer Brian Bailey, and loan officer Peter Hayes have pleaded guilty and are awaiting sentencing.

Two other co-conspirators already have been sentenced. James Ladio, former CEO of MidCoast Community Bank, was sentenced to two years in prison and ordered to pay $700,000 restitution. Businessman Salvatore Leone was sentenced to a year and a day in prison and ordered to pay $784,000.