FDIC Still Mopping Up Kevin Lewis' Fraud Mess

by Mark Friedman  on Monday, Aug. 4, 2014 12:00 am  

More than two-and-a-half years after former Little Rock attorney Kevin Lewis was sentenced to 10 years in federal prison for bank fraud, the Federal Deposit Insurance Corp. continues to clean up his mess.

Acting as the receiver for First Southern Bank in Batesville, which was shut down in December 2010 as a result of Lewis’ fraud, the FDIC in December reached a $1.69 million settlement agreement with the bank’s former officers and directors. Nearly all of the money was paid by the bank’s officers & board of directors’ liability insurance carrier, said FDIC spokesman David Barr.

Barr said the FDIC settled with the directors so it wouldn’t have to file a lawsuit against them. Barr declined to say what issues would have been raised in the complaint. “The FDIC, whenever a bank fails, we look into why that institution failed,” he said. “That is normal operating procedure for us.”

The FDIC now has turned its attention to the bank’s former accounting firm, BKD LLP of Springfield, Missouri. The FDIC blamed BKD, which has a large office in Little Rock, for allowing Lewis’ fraud to go undetected long enough to cause the bank to fail, the FDIC said in a lawsuit filed in December in U.S. District Court in Little Rock. The FDIC is seeking $17.5 million in damages.

BKD denied that it did anything wrong in handling the bank’s books and blamed the bank’s officers, who were “responsible for establishing the internal controls to prevent, deter and detect fraud,” according to BKD’s motion to dismiss the case.

The filings in the lawsuit have opened a new window into the collapse of First Southern and reveal how Lewis handled questions related to his phony improvement district bond scheme that killed First Southern, where Lewis was the majority shareholder, and defrauded other Arkansas banks of millions of dollars.

Lewis was sentenced in December 2011 to 121 months in federal prison after pleading guilty to one count of bank fraud. He also was ordered to pay $39.5 million in restitution to nine banks in what is considered the largest fraud prosecuted in Arkansas.

As of last week, Lewis, 46, has paid $2.17 million in restitution, according to the U.S. District Court Clerk’s Office. The office said, however, that the source of the restitution money or which banks have been paid wasn’t public information.

Lewis is serving his sentence in federal prison in Memphis and is scheduled to be released on Jan. 24, 2021.

Meanwhile, the FDIC’s receiver is winding down its involvement with First Southern, said Barr, the FDIC spokesman.

As of June 30, the receiver had only $23,000 worth of the bank’s assets left to liquidate, according to the receivership balance sheet summary posted on the FDIC’s website.

The FDIC estimated at the end of 2013 that the loss associated with the failure of First Southern would be $27 million, Barr said. He said the loss would be absorbed by the FDIC’s insurance fund.

 

 

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