UPDATE: Kevin Lewis Pleads Guilty to Bank Fraud, Agrees to $40 Million in Restitution

by Arkansas Business Staff  on Wednesday, Aug. 3, 2011 11:14 am  

Kevin Lewis, right, with attorney Tim Dudley, enter U.S District Court in Little Rock on Wednesday.

During a routine examination of First Southern in October, the Federal Deposit Insurance Corp. questioned the concentration of $22.7 million worth of improvement district bonds in the bank's investment portfolio.

The bank's attorneys and accountants discovered that the Lewis bonds were fake when the bank tried to sell them.

On Dec. 1, First State Bank of Lonoke sued Lewis for fraudulently misrepresenting the financial condition of First Southern Bank and defaulting on two loans totaling $7.6 million. Lewis had used his shares in First Southern as collateral for the loans.

Soon other banks were filing lawsuits against Lewis for defaulting on loans.

Woody Castleberry, the founder and former CEO and president of First Southern Bank, told Arkansas Business in May that he believed Lewis was using bogus bonds to fuel a Ponzi scheme.

"He would have legitimate bonds that he helped put together and those bonds paid out," Castleberry said. "At some point he discovered he could put money in his pocket by issuing fraudulent bonds, and when he did that, he had to start issuing more bonds to make sure he kept everything current."


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(With reporting by Gwen Moritz.)



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