Feds Studying Suspect Paperwork Tied to One Bank

Federal investigators are sorting through suspect documents gathered in an ongoing criminal probe of former executives at Little Rock’s One Bank & Trust.

Officials at Hydco Inc., a North Little Rock general contracting firm, and the Little Rock architectural firm of Witsell Evans & Rasco are among those who have been questioned about alleged work done for the $439.7 million-asset lender.

Sources indicate the companies had no record of the jobs and didn’t collect any money for the purported work. The paperwork is linked with an alleged scheme by former One Bank executives to cover financial chicanery.

The billing falsely attributed to Witsell Evans & Rasco was associated with phantom work on One Bank’s suite at Verizon Arena.

It’s unclear what property was associated with the alleged Hydco paperwork. Company officials declined comment.

So far, the most detailed glimpse into the criminal investigation has come through a Feb. 22 lawsuit filed by One Bank against Hunter Stuart, a former vice president. He is the son of the bank’s controlling shareholder, Layton “Scooter” Stuart, who was fired in September by the board of directors on the order of the Office of the Comptroller of the Currency.

The bank sued Hunter Stuart to recover more than $1 million in allegedly misappropriated funds.

The case in Pulaski County Circuit Court alleges unjust enrichment and conversion of bank funds in connection with the purchase of a $450,000 home in March 2009 and its subsequent renovation. The 5,300-SF residence is near the entry to Pleasant Valley Country Club in west Little Rock.

A building permit indicating a value of $200,000 was taken out for the renovation work on April 17, 2009. Wagner Construction Services LLC of Cabot was the contractor on the project. Rodney Wagner, the company’s namesake owner, had no comment regarding the job.

Public records indicate work on the house either was never completed or never received final inspection, although it has been occupied for months.

One Bank funds used to buy the house and remodel it reportedly were portrayed in its records as costs associated with improvements at two leased Little Rock branches.

The value of those phantom improvements at 15721 Chenal Parkway and 8000 Cantrell Road was allocated to “Value of Premises & Fixed Assets” on the bank’s balance sheet.

That line item has taken a noticeable dive since the OCC began delving deeper into One Bank’s business. (See below.)

One Bank & Trust Premises & Fixed Assets*

Value
December 31, 2008 $15,125,000
December 31, 2009 $14,677,000
December 31, 2010 $15,041,000
December 31, 2011 $14,030,000
March 31, 2012 $13,854,000
June 30, 2012 $13,750,000
Sept. 30, 2012 $10,689,000
December 31, 2012 $9,608,000

*Includes capitalized leases.

Looking at the Books

According to the complaint, Hunter Stuart wrongly received $94,527 from One Bank to cover the down payment on the house. He allegedly received those bank funds at the direction of his father and Tom Whitehead, who was the bank’s chief financial officer.

The complaint alleges that Hunter Stuart did not have sufficient assets to make the down payment and the loan application misrepresented his net worth and income.

Hunter Stuart received $94,527 through two cashier checks issued by One Bank, the lawsuit claims. The checks “were improperly accounted for on the bank’s books as being bank-related expenditures and did not reflect their true purpose,” according to the complaint.

One Bank also provided a $360,000 loan to finance the balance of the purchase. The lawsuit alleges that additional unspecified bank funds were used to pay for renovation work on the house.

The outlay of these unspecified funds was hidden on the bank’s general ledger as “Bank Building Under Construction” and later “Leasehold Improvements,” according to the complaint.

According to the complaint, Scooter Stuart approved the invoices related to the remodeling work at his son’s house, and Whitehead processed the payments and posted the entries to the bank’s fixed asset system.

“The property renovation costs were paid from funds illegally diverted from [One Bank] between mid-2009 to mid-2011,” the lawsuit alleges.

The city has no permit record for construction work at either branch location during that time.

“The misappropriation and concealment of bank funds was done at the direction, and with the participation and knowledge of L. Stuart along with the assistance of Whitehead, and [Hunter Stuart] knew or should have reasonably known these payments were not authorized payments by the bank,” the suit alleges.

One Bank is seeking possession of the residence or a lien on the property to secure its financial claim, followed by a court-ordered sale of the home.

(Also see One Bank Rebuilds Its Leadership.)