The former chairman and CEO of Summit Bank, James E. Bishop, pleaded guilty Wednesday to deceiving federal regulators about the financial condition of the Skagit County bank, which failed in May 2011.
The U.S. Attorney’s Office in Seattle said Bishop’s plea agreement acknowledged that between 2009 and 2011, he concealed from regulators the growing quantity of past-due loans, “causing the bank to appear financially healthier than it actually was.”
Bishop, 70, a Mount Vernon resident, and his son James E. Bishop Jr., the bank’s president from 2005 to April 2011, owned more than 50 percent of the three-branch bank, according to the charges.
Both were charged last week with a single count of filing false call reports to the Federal Deposit Insurance Corp. (FDIC), which oversees banks and insures their deposits.
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The elder Bishop’s plea agreement recommends a prison term of 12 to 41 months.
A civil settlement with the FDIC requires Bishop to pay $300,000 and be barred for life from working at any federally insured banking institution.
U.S. District Judge Marsha Pechman will determine the sentence Nov. 15. The younger Bishop is scheduled for a plea hearing Sept. 5.
Banks must file quarterly call reports to disclose detailed financial data, including the extent of loans that are at least 30 days overdue.
Between March 2009 and April 2011, according to the U.S. Attorney’s Office, the Bishops used various transactions to remove millions of dollars of loans from the bank’s past-due report at the end of each quarter, so the call reports wouldn’t reflect the bank’s real condition.
The quarter ended June 30, 2010, is representative, according to prosecutors: The bank reported past-due loans of about $6 million, while the correct figure was at least $13 million.
Among the Bishops’ moves was making a loan to a family member of a borrower with an overdue loan, and using that money to pay the past-due loan. They also misled the bank’s board to get increases in loans to overdue borrowers, the charging papers say.
The senior Bishop resigned as Summit’s chairman and CEO in November 2010 but still had a hand in the bank’s transactions until just before the bank failed, prosecutors say.
Regulators became concerned about the bank’s financial soundness as early as 2008. In March 2011, the FDIC classified the bank as “significantly undercapitalized” and ordered it to find additional capital or a buyer.
Just two months later, state banking regulators closed Summit, and the FDIC arranged for Columbia State Bank to assume its deposits and assets.