CFO's spouse formed a corporation and purchased an group of condo units the bank had foreclosed on (the bank also did the financing for the Corp). Units were refurbished and sold to individual buyers (bank also did most of the financing on these condos). When all of the units were sold, there was a balance owed in excess of $300,000 which the bank charged off less than 6 months ago.

CFO and spouse just formed another corp and purchased another group of condos (bank did deed in lieu of forclosure on these), once again financed by the bank. Is it just me or is something very wrong with this scenario?

Would this be considered preferential as I cannot cite one other instance where we have (or would have ) extended credit to another borrower who left us with any loss.

Thank you in advance for any thoughts or suggestions you have.

Very-very wrong. The loans themselves most likely violate the dollar limitations for EOs under Reg. O as the transactions would indirectly benefit the CFO. Most banks would fire an employee for being involved in causing the bank such a loss. I would not want to be any where near your bank during the next Fed exam.

Ok, that is definitely not "nothing." I agree with Randy, this is a mess for your bank... Yikes....

Wow...

Wow. Talk about a train wreck. I agree with Randy and the others.

Original Anon here. Thank you for your responses, not what I wanted to hear, but what I expected. I'm in IA and attempts to discuss this file have been shut down pretty quick by Sr.'s. I'm thinking at this point I should document my efforts as thoroughly as possible to CMA.

Thanks again for your input.

Do you have some type of whistleblower policy that you can follow?

Good point. At my former employer, I was the go-to person for reporting such things (anonymously if needed) and I had a straight line to the chairman of the audit committee, who I was required to report any "whistleblower" activity. Also, employees could also go straight to the chair of the AC if they felt like it had to go straight to him (we did that so people didn't think I was above the law and could never be reported if need be).

Even if you don't have a formal policy, or the policy involves someone who you know will hush it up, could you go directly to someone on the board with your concerns?

I think that the Sarbanes-Oxley Act requires a formal policy.

Oh, I know, but some banks have policies that leave much to be desired

Anonymous - have you thought about contacting the chairman of your audit committee directly?

Original anon here. Very small bank here, they do have a whistle blower policy (everything goes to the AC chair). He is aware of this and assures me that he has been assured there is nothing wrong with these transactions. Feel like I have exhausted options here.

Thank you all again for your input.

Document everything, Copy or back-up docs off site in a secure manner. Get your resume in order and start looking to leave as soon as you can find another employment opportunity.

Best of Luck to you!

I agree. This sounds like a terrible mess...

Good luck!

This is indeed a mess. Document heavily, as others have said, keep a copy, and brush off and update the resume. Time to get out of dodge.

Not sure exactly what your role is with the organization, but also keep your SAR procedures in mind - be sure to report if that's your role or escalate up to the BSA Officer (you may have already tried and been cut-off but I thought it important to mention).


Best of luck in what sounds like a very bad situation.

Do you have any type of external audit? External Auditors can be a big help in a "sticky situation" like this.

Does a $300,000 loan need any type of loan committee approval or directors approval?

If this was an executive officer's related interest, shouldn't the loan have been approved by the Board?