U.S. District Judge Kristine Baker's Little Rock courtroom was full of people exchanging hugs Monday afternoon after a federal jury acquitted two former One Bank & Trust executives of all charges they faced in a three-week trial.
The hugs and loud sighs of relief broke out seconds after the eight men and four women on the jury left the courtroom after six hours of deliberations, and Baker announced that court was in recess.
Michael Francis Heald, 56, a former chief operating officer of the Little Rock-based community bank, stood and enveloped his attorney, Gary Corum, in a bear hug. Bradley Stephen Paul, 54, a former executive vice president at the bank who recently quit his job at a Pea Ridge bank to prepare for his trial, likewise hugged his attorney, Lloyd "Tre" Kitchens while family and friends of the men who filled one side of the courtroom gallery reached across benches to hug one another and wipe away tears of relief.
"We've got a hell of a justice system," a smiling Kitchens said minutes later as he emerged from the courtroom.
"We're extremely pleased about him finally being vindicated after three years," Corum said later, referring to Heald. "It's a fearsome thing, and it takes a toll on you beyond what most folks can imagine."
Both defendants declined to make any public statements, opting to let their attorneys speak for them, but Paul's wife, Anita, wiped her eyes and said, "Thank God it's over," as they walked away down a courthouse hallway.
The two bankers had been under indictment since March 2015, and under scrutiny for at least a year before that, on accusations of helping hide a bad $1.5 million loan from federal regulators and nonbank members of the bank's board of directors to assist the bank's application for a $17.3 million government loan.
They were each charged with conspiring to breaking one or more of five federal banking laws (bank fraud), conspiring to conduct an illegal financial transaction (money laundering), and aiding and abetting a false report to the Federal Deposit Insurance Corp. Paul also faced an additional charge of aiding and abetting a false entry by One Bank to the FDIC.
During the trial, Baker threw out another charge against both men: aiding and abetting a false entry in a quarterly call report the bank submitted to the FDIC for the quarter ending Dec. 31, 2008.
At the heart of the case was a $1.5 million line of credit the bank extended in April 2007 at the recommendation of Gary Rickenbach, now 59, a former senior executive vice president, to Albert Solaroli, a Jacksonville, Fla., investor and race-car builder. Rickenbach didn't reveal to his fellow bankers, including former Chief Financial Officer Tom Monroe Whitehead, that he had personally invested $25,000 with Solaroli, whose loan he presented as solidly backed by collateral.
Solaroli agreed to repay the line of credit in a year, and to make quarterly interest payments of about $30,000 each, but he ended up not making a single interest or principal payment, and the bank sued him in 2008, obtaining a default judgment against him in a Florida court.
Rickenbach testified that to avoid the Solaroli debacle from being counted as a loss on the bank's books, he engineered a complicated plan through which two new borrowers took out loans from One Bank that they used to pay off the $1.5 million debt, in return for the judgment, which they might eventually be able to collect on. As new performing loans, each supported by solid collateral, the two loans improved the bank's status. They were paid off with still new loans arranged by Rickenbach.
While testifying that he carbon-copied emails about his plan to Heald and Paul, Rickenbach acknowledged keeping many details to himself until the Solaroli loan was officially erased from the bank's books. Heald and Paul both testified that they didn't read all of Rickenbach's emails, and both denied being aware of any illegal activities related to the plan to keep the bank from suffering a loss as a result of the Solaroli default.
Rickenbach pleaded guilty to a charge of misprision, or knowing about a crime but failing to report it, and agreed to testify in exchange for more serious charges being dropped. Whitehead saw his seven charges dropped in December in exchange for his cooperation, which included testifying about millions of dollars that he helped the bank's former owner, Layton Stuart, steal from the bank before federal regulators ousted Stuart in August 2012.
Stuart died in March 2013 and was never indicted, although federal prosecutors later sued his estate to collect millions of dollars in bank funds they said he used to support a lavish lifestyle and buy expensive homes for his son and daughter, among other things.
While focusing on Stuart's actions, Whitehead sought to portray the overall bank atmosphere, and all the bank's executives, as corrupt.
Both Heald and Paul had six-figure salaries, bank-owned cars, country club memberships and generous retirement packages, Whitehead testified, suggesting that they would do all they could to keep their jobs, especially if Stuart insisted upon it. But Rickenbach testified that even Stuart didn't know all the details of his plan.
Heald said he gave up his high-paying job in 2013, leaving banking altogether to start a new career in a video production business with a good friend, after he refused to sign off on a plan of Stuart's that "didn't pass the smell test," and Stuart fired him. Heald said he stayed on for several months after that while he tried to negotiate a severance package, but ultimately left without any agreement.
Paul testified that despite his charges, the FDIC allowed him to continue working as a banker, first at One Bank and then in Pea Ridge, because the accusations against him and his duties didn't endanger depositors or shareholders. It wasn't clear on Monday whether he intends to return to banking now that he has been cleared of wrongdoing.
First Assistant U.S. Attorney Pat Harris, who prosecuted the case with Assistant U.S. Attorney Angela Jegley, didn't comment after the verdict. But Harris said in an earlier proceeding that both Heald and Paul had rejected plea bargains that would have left them with only the relatively minor charge of misprision.
Corum said Monday that Heald and Paul always knew they hadn't committed any crimes.
"The defense that we used was the very same defense that we had given to federal prosecutors and investigators for years," Corum said. "Sometimes, it's impossible to explain things to people who don't want to understand."
He added, "We're grateful for a jury that cared enough to listen and learn."
Monday's verdict put an end to the case except for Rickenbach's sentencing, which hasn't been scheduled.
Metro on 11/01/2016