Kevin Lewis, the former Little Rock attorney connected to fake special improvement district bonds that cost Arkansas banks some $50 million and spelled doom for First Southern Bank of Batesville, was sentenced Friday to 121 months in federal prison.
The sentence, handed down by U.S. District Judge James S. Moody, comes four months after Lewis, 43, pleaded guilty to one count of bank fraud.
The sentence is on the low end of sentencing guidelines, which called for between 121 and 151 months in prison, and it was requested by both Lewis’ defense attorney, Tim Dudley of Little Rock, and the federal prosecutor, Karen Whatley. He will also spend three years under supervised release after he is released from prison.
In the courtroom Friday,
In a soft but steady voice, Lewis said he had been an only child who grew up in a loving home, and that he continues to live with his wife and children. "I never considered myself to be a greedy person," he said, but acknowledged that his actions made it look like he was.
He then apologized for his "apparent greediness and laziness," and he said he hoped to spend the rest of his life repaying the people he had hurt, financially and otherwise. Although it hasn’t been made public, Lewis has written a plan for his life following prison that includes helping the less fortunate.
"I do consider myself at this point to be very blessed" with "good friends and family that love me," Lewis said.
He expressed "deep remorse" and said he couldn’t believe that he had allowed himself to sink so "ethically low and morally low."
"The only person who is responsible for this is me and me alone," he said.
Lewis’ attorney also said Lewis has an alcohol problem and requested that Lewis receive treatment while in prison.
He will be ordered to pay tens of millions of dollars in restitution to the nine banks he ripped off by selling them bogus bonds or using the bonds as collateral on loans, and to the Federal Deposit Insurance Corp. The FDIC assumed receivership of First Southern almost a year ago after it was discovered that the bank had invested some $22 million in Lewis’ phony bonds. Lewis, through a trust he set up, was the majority owner of First Southern.
The exact total of the restitution was not settled on Friday because of a dispute over the total owed to Centennial Bank of Conway.
Moody ordered Lewis to report for prison on Feb. 7, giving Lewis time to spend with his father, who Lewis’ attorney said was terminally ill.
Centennial Debts
The restitution owed to Centennial is complicated because Lewis had two business relationships with the bank: He owed approximately $3.6 million on two mortgages secured by an apartment complex and adjacent land in Saline County, and he sold the bank $4 million worth of bonds issued by a property owners improvement district associated with the same properties.
Lewis and his lawyer, Dudley, voluntarily turned the Saline County properties over to Centennial in lieu of foreclosure, and Centennial ultimately sold the properties for approximately $5.8 million, according to testimony by Centennial Vice President J. Stephen Tipton.
Lewis, according to Dudley, assumed that the $2 million-plus in equity Centennial cleared from the sale would be applied to the restitution he owed on the $4 million bond issue. But Centennial argues that the two debts are not related.
Centennial also received a consent judgment in Saline County finding that the improvement district was never properly formed in the first place and that the bonds were therefore fraudulent. But Lewis, called to testify by Dudley, said that improvement district – unlike so many others – was legitimate and had been created with the assistance of James Buttry of the Friday Eldredge & Clark law firm in Litte Rock.
Buttry could not be reached for comment late Friday afternoon, but he has issued an opinion letter saying the improvement district was legitimate and valid. As the only owner of property in the district, Lewis said he sent annual interest payments on the bonds directly to Centennial’s trustee.
Judge Moody said he would receive briefs from Dudley and the U.S. Attorneys office and rule separately on the amount of restitution owed to Centennial.
‘Largest Fraud in the History of Arkansas’
In the plea, Lewis admitted selling the bonds to First Southern Bank in Batesville and several other Arkansas banks. He agreed to pay restitution of nearly $40 million.
In August, U.S. Attorney Christopher Thyer called the case "the largest fraud in the history of Arkansas," and Judge Moody on Friday said, "I do think this is about the most serious fraud I’ve encountered in the years I’ve been in this courthouse."
The first fraudulent bonds dated back to 1997.
The exposure of Lewis’ scheme, first reported by Arkansas Business in December 2010, triggered lender lawsuits tied to more than $23 million in outstanding debt amassed by Lewis and his various entities.
(With reporting by Gwen Moritz and Mark Friedman.)
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