Fraud and Credit Crisis and Old National and Banking & Finance and Criminal Charges and Loans and Law

Banker who wreaked havoc fesses up to felony charge

July 17, 2010

Indianapolis loan officer Rob Tolle served as an executive vice president of Old National Bancorp, a lofty post that put him in charge of millions of dollars in real estate loans to central Indiana developers.

That’s a high-stress job even in a strong economy. But overseeing a portfolio filled with deteriorating loans is downright excruciating, as lending officers who’ve lived through the carnage of the recession can attest.

Tolle apparently cracked under the pressure, and he now admits to creating a fake project-inspection report in late 2007 in an attempt to prevent Old National from reviewing or downgrading a $2.8 million real estate loan.

He submitted a plea agreement in federal court in Indianapolis this month admitting guilt to one felony count of creating a false bank entry. The charge carries a maximum sentence of 30 years in prison and a $1 million fine.

The agreement, which requires court approval, stipulates that Tolle, 39, receive credit under sentencing guidelines for accepting responsibility and that the government not bring additional charges related to his fraud.

But the faked inspection report is just one example of the mayhem caused by Tolle, according to Old National, which has said the shenanigans cost it many millions of dollars.

Bank officials in 2008 said they began scrutinizing Tolle’s portfolio early that year after several of his loans deteriorated. They said they initially found the forged inspection report and later unearthed other misconduct, such as faked signatures, that hindered Old National’s ability to seize collateral in the event loans soured.

For example, on one large loan Old National had required the personal guarantees of the borrower’s three principals—one of whose signatures it found had been forged.

In another case, Old National thought it had access to cash collateral but found the borrower’s pledge of those accounts was forged.

The bank in the first half of 2008 charged off $13.9 million related to what it called “the fraud-related incident.” It stashed away another $4.6 million to cover other potential losses.

Old National CEO Bob Jones told IBJ this month that those moves “more than adequately covered the losses from this terrible situation.” He noted the bank carried insurance and was able to liquidate some collateral.

The whole episode befuddles developers who worked with the veteran lender.

“I would say Rob never struck me as the kind of guy who would do something like this,” one developer said. “His demeanor was very professional.”

The criminal case revolves around the $2.8 million loan Old National issued in May 2006 to locally based Camby Woods Development LLC, which was planning a 103-acre development of single-family homes and apartments in Indianapolis’ Decatur Township.

Court files say Tolle’s Camby Woods loan file included an August 2007 report updating construction progress that appeared to have been prepared by outside vendor Professional Service Industries Inc.

But when an Old National loan manager attached that document to a February 2008 e-mail asking PSI to prepare an updated report, PSI responded it had no record of the earlier inspection.

Three days later, in a meeting with Old National’s head of security, Tolle admitted he fabricated the report. He said he had scanned in PSI letterhead and the signatures of PSI managers to make it look official. His motivation, he said, was to keep the loan in good standing.

Old National ultimately charged off $1.3 million of the $2.8 million loan, court files show. Camby Woods Development put the brakes on the project when the real estate market crashed. The firm has its first 40 home lots ready for building.

Meanwhile, the bank is still wrestling with other Tolle fallout. For example, several local investors have filed lawsuits against him and the bank charging they were fraudulently induced to provide loans for construction of the Mansion Row Apartments on Cold Spring Road.

Old National had issued a $4.3 million loan for the project in 2006. According to one lawsuit, Tolle a year later began trying to line up additional financing to sustain the project.

In a letter attempting to drum up investor interest, he wrote: “Right now, the apartment market is probably stronger than it has been in the last five years. We all know the issues in the housing market. That being said, while I am not an appraiser, I think it is reasonable to assume the apartments at Mansion Row could have [a] stabilized value in the $7 million to $8 million range.”

Old National ended up foreclosing on its loan, and a group of Cincinnati investors purchased the property this year.

Robert Hammerle, an attorney for Tolle, said his client makes no excuses for breaking the law.

Even so, he said, “There is an explanation. It deals a lot with what is expected of you as a banker, and the pressure and demands that are on these guys.

“Sometimes, that results in very, very good people doing something they will regret to their grave. This is one of those times.”•

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