IberiaBank's Fraud Suspect Identified

by Gwen Moritz  on Monday, May. 11, 2009 12:00 am  

Dana Washburn

The Arkansas customer whose phony collateral forced IberiaBank Corp. to take a $3.6 million write-off in 2008 was a prominent northwest Arkansas couple, Colon and Dana Washburn of Rogers, court documents and sources confirm.

A civil suit — originally filed in Benton County Circuit Court in December and amended in April — accuses Dana Washburn of defrauding IberiaBank’s Arkansas charter, Pulaski Bank & Trust of Little Rock, by using a fake brokerage account as collateral. Pulaski also alleges that she had help from her parents, Daymon and Betty Taylor of Rogers.

The lawsuit does not accuse Colon Washburn of any wrongdoing, although he is a defendant because his name is on the loans with his wife’s.

Dana Washburn, in a response filed April 14 by Fayetteville attorney W.H. Taylor, asserted her Fifth Amendment right against self-incrimination seven times. Multiple sources have told Arkansas Business that Dana Washburn is likely to plead guilty to federal charges, although no charges had been filed against her as of last week. She and her lawyer declined to be interviewed.

Colon Washburn is a former Wal-Mart executive and real estate developer. Ironically, the biggest deal of his real estate career, the $56 million sale of Beau Terre office park in Rogers in 2004, also seems to have led to his financial downfall and his wife’s criminal entanglement.

His lawyer, Rickard Hood of Bentonville, did not return a call seeking comment, nor did the lawyers representing Daymon and Betty Taylor, Jack Lassiter of Little Rock and Charles Kester of Fayetteville.

Background
IberiaBank announced on Jan. 21, as part of its year-end earnings release, that it had written off $3.6 million in the fourth quarter of 2008 due to credit fraud by an Arkansas client. The client was not and still has not been publicly identified, but IberiaBank left a string of tantalizing and sometimes confounding clues that led to the Washburns.

CFO Anthony Restel said Iberia-Bank began to question the borrower’s financial status “in early January” after a foreclosure notice was filed on the borrower’s primary residence, on which Pulaski Bank held a second mortgage of $600,000.

That was a reference to the notice that IberiaBank received concerning a nonjudicial foreclosure that Regions Bank filed against the Washburns on Dec. 2. That first mortgage claim, valued at just under $1 million, has since been incorporated into the Pulaski Bank litigation.

While IberiaBank may not have realized the extent of the Washburns’ money problems until then, it certainly knew there were problems: Pulaski Bank’s lawyer, David B. Vandergriff of the Little Rock law firm of Quattlebaum Grooms Tull & Burrow, had sued the couple in Benton County Circuit Court on Dec. 19.

That complaint included a notice of foreclosure on the same 6,400-SF house at 5 Beau Chene Lane in Rogers, and it said Pulaski Bank “became suspicious” when “it was unable to confirm the existence” of a brokerage account that the Washburns had used to secure an additional $3.6 million in loans.

However, it wasn’t until the Jan. 21 earnings release that IberiaBank began to allege actual fraud.

When the complaint was amended on April 9, the picture became clearer, although many questions remain. Here’s the bank’s claim, in abbreviated form:

• Colon and Dana Washburn and their company, Beau Chene Farms Inc., were longtime customers of First Community Bank of Jonesboro, which was sold to IberiaBank and merged with Pulaski Bank & Trust of Little Rock in 2007. First Community had extended the Washburns a $700,000 second mortgage on their Beau Chene house in 2002, and it had been repeatedly extended and modified.

• On May 2, 2008, the Washburns refinanced two existing loans — one of $2.3 million and one of $500,000 — and borrowed an additional $265,000 with promissory notes secured by a brokerage account at Stephens Inc.

• On May 22, the Washburns' company, Beau Chene Farms, refinanced the second mortgage, which had a principal of $610,500.

• On Aug. 12, the Washburns renewed another $600,000 loan against the Stephens brokerage account.

• In September, after Pulaski Bank made some inquiries into the status of the Stephens account, Dana Washburn said the account had been transferred to Raymond James Financial Services Inc. On Oct. 6, the Washburns signed the paperwork giving Pulaski Bank a security interest in the Raymond James account. The bank alleges that Daymon Taylor posed as an account representative for Raymond James and provided "false and fraudulent information," while Betty Taylor allegedly created an e-mail account that was used to provide fraudulent information to Pulaski Bank.

• "Pulaski Bank became suspicious … when it was unable to confirm the existence of the account" at Raymond James. The debt became delinquent, so Pulaski Bank asked for more collateral, which came on Nov. 26 in the form of more security interest in their house.

• A week later, on Dec. 2, the Washburns were in default on $3.736 million in principle and interest on the loans supposedly secured by their brokerage account, and Beau Chene Farms was in default on the second mortgage. Pulaski Bank filed its first complaint in Benton County Circuit Court on Dec. 19.

Personal History
According to Securities & Exchange Commission filings, Colon O. Washburn, 63, joined Wal-Mart Stores Inc. of Bentonville in 1971 and remained there until January 1993. His ultimate titles were senior vice president and executive vice president of the Sam’s Club division.

Coinciding with his departure from Wal-Mart, Beau Chene Farms Inc., a real estate development company, was incorporated in Arkansas by Colon Washburn and his then-wife, Harriette (who is now married to retired Wal-Mart executive Glen Habern). Beau Chene Farms developed the subdivision of the same name in Rogers that remains one of northwest Arkansas’ most exclusive residential neighborhoods.

In April 1994, Arkansas Business reported that Beau Chene Farms had begun construction on Beau Terre Office Park in Bentonville, which the Northwest Arkansas Business Journal later described as northwest Arkansas’ “original retail vendor haven.”

Colon and Harriette Washburn started with a $1.25 million, 35,000-SF building, and the expansion continued long after the Washburns divorced in 1997. Colon quickly married Dana Taylor, a former co-worker at Sam’s Club who is about 20 years younger.

Last week, Dana Washburn answered her desk phone at Cameron Smith Associates, a Bentonville executive recruiter and staffing agency that specializes in working with Wal-Mart vendors. According to the agency’s Web site, she is a member of the “Wal-Mart Bentonville team.”

Dana Washburn also owned, until recently, a popular and award-winning boutique for scrapbook enthusiasts called Signed Sealed Delivered on South 52nd Street in Rogers.

In June 2004, when Beau Terre was sold to Behringer Harvard Funds of Dallas, it reportedly comprised 371,083 SF in 36 buildings. The $55.87 million transaction ranked 10th on Arkansas Business’ list of the biggest deals in the state during 2004. How much the Washburns cleared on the sale is not a matter of public record, but a source indicated that it was between $7 million and $8 million before taxes.

When the Business Journal broke the news of the sale, it quoted Colon Washburn as saying that his wife was the “best leasing person in the United States.” She was responsible for the tenant layouts and tenant leasing relations in Beau Terre, he said.

Although it escaped notice in Arkansas, the deal led to a protracted and complicated civil lawsuit in Dallas, where the sale contract required any disputes to be litigated.

Danny Thomas Real Estate Inc. of Little Rock, which brought Behringer Harvard to the table, was forced out as manager of Beau Terre at the end of 2005, after numerous problems with the property and its cash flow became apparent. On Jan. 3, 2006, Kenneth Beirmacher, a partner in the Kane Russell Coleman & Logan law firm in Dallas, sued Behringer Harvard in the District Court of Dallas County on behalf of Danny Thomas Real Estate and DT Capital Group. According to Beirmacher, the management contract on Beau Terre was supposed to be Danny Thomas Real Estate’s reward for bringing the deal to Behringer Harvard.

Behringer Harvard countersued, claiming that Danny Thomas, the Washburns and the Washburns’ broker, Plunkett Boerner & Associates, conspired to misrepresent the Beau Terre property. The problems outlined in the case included leases that weren’t as represented, expenses that had been hidden and, most baffling of all, a building that was missing. Instead of 36 buildings in the Beau Terre development, there were only 35.

“To the extent [Dana Washburn] was this great leasing agent, she certainly did some things that were questionable,” Beirmacher said.

While Danny Thomas is still pursuing its complaint against Behringer Harvard, the Washburns settled their parts of the litigation in 2008. The dollar amounts are not public record, but the time line is:

• On June 2, 2008 — a month after the Washburns borrowed more than $3 million and less than two weeks after they refinanced their second mortgage — they were released from the litigation by Behringer Harvard, indicating they had paid the agreed-upon settlement amount.

• On Sept. 18, five weeks after they refinanced another $600,000 loan from Pulaski Bank, Danny Thomas Real Estate dropped its claim against the Washburns.

Even if the loans were used to pay the settlements, Beirmacher said, Pulaski Bank would have no recourse against Behringer Harvard and Danny Thomas because they had no way of knowing the money was fraudulently obtained. 

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