Federal prosecutors in Washington have filed a civil lawsuit accusing the late Layton P. "Scooter" Stuart of fraud when he secured $17.3 million in TARP funds for his Little Rock bank in 2009 and asking for triple that amount in damages from his estate.
The lawsuit, filed a week ago in U.S. District Court for the District of Columbia, is the latest in a cascade of civil and criminal cases alleging widespread and long-term fraud by Stuart and other executives of One Bank & Trust and its holding company, One Financial Corp.
Federal bank regulators forced the bank's board to remove Stuart as president and CEO in September 2012, even though he owned 99.4 percent of the holding company, and he died on March 26, 2013.
The 26-page complaint (PDF) names as defendants Stuart's estate and his family trusts, along with trustee Richard A. Torti Sr. of Little Rock; Stuart's widow, Tommye H. Stuart of Miramar Beach, Florida; his adult son, Hunter P. Stuart of Little Rock; and his adult daughter, Kirby L. Stuart of Dallas.
Prosecutors, led by Assistant U.S. Attorney Beverly M. Russell of Washington, make a simple allegation: Stuart knowingly misrepresented the financial health of One Financial when he applied for an injection of capital made available by the U.S. Treasury to shore up bank lending in response to the financial crisis of 2008.
The TARP investment was supposed to stabilize the bank, prosecutors said, "but a significant portion personally benefitted Stuart, his family and his conspirators, many of whom have since been indicted."
Although they are not named as defendants in the new civil case, four former One Bank executives are mentioned in the government's recounting of the many ways that Stuart allegedly defrauded the bank: Tom M. Whitehead, Michael F. Heald, Gary A. Rickenbach and Bradley S. Paul. All are currently under federal indictment and scheduled for trial in December.
The allegations of fraud by Stuart are not new and include the use — and the hiding of that use — of bank funds for personal expenses, including homes and cars for members of his family. Prosecutors honed in on a $20 million life insurance policy purchased with annual premiums of $350,000 paid by One Bank and then used as a source of cash for the Stuart family.
The government also argues that the family trusts were abused "from their inception" and "are alter egos of Stuart and the Estate, and the assets of the Trusts are assets of the Estate."
Christopher Parker, the Little Rock attorney who represents the Stuart estate, trusts and Torti, did not immediately return a phone call seeking comment, nor did Glen G. Reid, the Memphis attorney who represents Stuart's widow and children.