Public Safety

Former banker at Center Point Bank and Trust sentenced to one year in prison for deceiving regulators

Also must pay over $1.2 million in restitution

CEDAR RAPIDS — A former vice president at Center Point Bank & Trust was sentenced Thursday to one year in prison following his conviction for backdating loans to deceive regulators and making loans for larger, unauthorized amounts in an attempt to avoid bank regulations.

Martin Smith, 39, pleaded guilty in August to aiding and abetting the obstruction of a financial institution.

While bank regulators were at the bank in December 2011 conducting an examination, Smith consolidated all of a delinquent customer’s bad debt into a single loan and backdated the loan to November 2011, according to court documents.

Smith backdated the loan so the bank’s board wouldn’t see it on a new loan report, and the bank president could show regulators that the loans were paid off and not “worthy of scrutiny,” according to court documents.

Sentencing documents state similar activity occurred over several years while Smith was employed from 2009 to 2012.

In one example, Smith tried to make it appear the bank wasn’t violating certain regulatory limits involving loans to individual borrowers by backdating loan documents and creating false documents to show that one borrower’s loan had been purchased by an affiliated bank, even though that purchase never occurred, according to court documents.

Smith authorized $1.3 million in loans on a line of credit that was limited to $100,030 and authorized another loan for more than $35,000 even though the line of credit was limited to $5,030, according to court documents.

Smith did this to keep non-performing loans and overdrawn accounts off the bank’s delinquent loan reports and overdraft reports, the documents show.

Leon Spies of Iowa City, Smith’s lawyer, argued his client didn’t benefit financially from his actions and was being directed to do these things by his boss, the president of the bank. He was just “following directions,” Spies said.

Assistant U.S. Attorney Tony Morfitt said Smith, who worked in the banking industry for several years, knew what he was doing was wrong. He may not have benefited financially, but it “endeared” him to his boss and he continued to be employed.

There was no evidence Smith was forced or coerced to take these actions, Morfitt added.

Smith, during the hearing, apologized to the court and his family, but he mostly blamed his boss for directing him to take actions to help the bank. Smith said he realizes now what he did was wrong and has taken responsibility for his actions.

U.S. District Judge C.J. Williams said Smith was under the influence of his boss and probably wouldn’t have committed these crimes otherwise. However, he said, Smith’s “motive was greed.” He mentioned that he wanted to be president of the bank someday and was “willing to cheat and steal to get ahead.”

Williams sentenced Smith to 12 months and one day in prison. The one additional day would allow Smith to be eligible for good behavior credit, which could reduce his time in prison.

Williams also ordered Smith to pay over $1.2 million in restitution to the bank and serve three years on supervised release following his prison term.

l Comments: (319) 398-8318; trish.mehaffey@thegazette.com

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