Layton "Scooter" Stuart, the now former CEO of One Bank & Trust.
The federal government seized $17.85 million from the family of Layton “Scooter” Stuart, the former CEO of One Bank & Trust of Little Rock, alleging that the money was tied to the late executive’s bank fraud and money laundering.
An Internal Revenue Service investigation found a number of crimes Stuart allegedly committed while at One Bank, including “designing a scheme to willfully misapply money, funds or credits entrusted to the custody and care of a financial institution regulated by the Office of the Comptroller of the Currency,” according to the civil forfeiture lawsuit (PDF) filed Friday by the U.S. Attorney’s Office for the Eastern District.
The lawsuit is the latest example of a civil forfeiture case filed by the federal government against people who haven’t been charged in a crime. Stuart was never charged in connection with the crimes and he won’t be: He died on March 26 at age 62.
The IRS seized $17.69 million on June 17 from a John Hancock Life Insurance Co. policy and another $158,987 from a number of bank accounts Stuart had, according to an affidavit filed in the case by John Shortway, an IRS special agent. Other items seized included a 2008 Cadillac Escalade, a 2013 Lexus and 2013 Land Rover Range Rover.
Stuart was the owner of One Financial Corp., the holding company for One Bank & Trust of Little Rock. He was its former chairman and CEO.
Early problems started for Stuart in March 2012, when the OCC’s Little Rock Office received a tip that there was mortgage fraud in connection with loans to Stuart’s children and misuse of bank money for personal construction projects, Shortway said in the affidavit.
A lawsuit filed in February by One Bank & Trust made the same allegation. The bank is trying to recover more than $1 million in allegedly misappropriated funds from Hunter P. Stuart, a former bank vice president and Scooter Stuart’s son.
The lawsuit alleges unjust enrichment and conversion of bank funds in connection with the purchase of a $450,000 home in March 2009. According to the complaint, Hunter Stuart wrongly received $94,527 from One Bank to cover the down payment on the 5,300-SF home in west Little Rock’s Pleasant Valley neighborhood.
Scooter Stuart’s reign at the bank ended shortly after the OCC told him in August not to destroy any bank records. But about a month later, according to the complaint filed last week, a mobile document destruction truck came to the bank and left with four 95-gallon containers filled with records and documents from the bank.
On Sept. 25, the OCC ordered the bank’s directors to strip Stuart of his positions and fire him, which the board did on Sept. 28. The following month, One Bank’s directors appointed Gerald F. “Jerry” Pavlas as president, CEO and director.
Bank Examination
By the time Stuart left the bank, his world was beginning to crumble. In June 2012, bank examiners did a routine inspection at the bank and found “insider transactions involving a revolving line of credit for Stuart which was not approved by the board of directors and unapproved leasehold improvements on luxury suites leased by the Bank at the Verizon Center in North Little Rock,” Shortway said.
Further digging found that Stuart dipped into the $17.3 million the bank received in 2008 from the TARP — the federal government’s Troubled Asset Relief Program — to pay back taxes he owed to the state of Arkansas and the IRS, Shortway said.
“In an attempt to conceal the true nature of the expenses, the general ledger entries indicate the expenditures were associated with a Bank asset account known as ‘Interdepartmental Account,'” Shortway said.
Shortway also said the checks were initialed by a former senior manager, who wasn’t named in the affidavit. Arkansas Business reported in February that at least five former One Bank executives, in addition to Stuart, were involved in the investigation.
Shortway said that “Stuart was the transactional beneficiary of embezzled TARP funds and/or fraudulently obtained loan proceeds between his bank accounts and third party creditors, thereby tainting all of the” property that the government is trying to take.
If Stuart’s family is going to get the property and money back, it will have to argue in U.S. District Court that the money and the property didn’t come from criminal activity. As of Monday morning, an answer hasn’t been filed in the case.
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