Banker trial is ‘goobered up’

PANAMA CITY — Judge Richard Smoak closed the first week of the trial of three leaders of a failed local banking company with some instructions for the attorneys: un-goober this trial.

“Right now, we’ve got this thing goobered up to a dang fare-thee-well,” Smoak said after dismissing the jury.

What that meant is the attorneys need to figure out a way to try the case without putting jurors to sleep. Smoak worried that the jurors were going numb from three-and-a-half days of dense testimony about contracts and regulatory language and the documents that have accompanied that testimony.

Elwood West, Terry Dubose and Frank Baker, the CFO, CEO and attorney for Coastal Community Investments, respectively, are charged with 12 felonies for their roles in an alleged conspiracy to defraud the FDIC.

It’s not like a gun charge, Assistant U.S. Attorney Gayle Littleton said; her case is complex by necessity.

“It’s a document case, and honestly your honor I can’t do anything about that,” Littleton said, adding later, “this is a major fraud case, and we’ve only had three-and-a-half days.”

Steve Burton, who helped to write the FDIC regulations for the Temporary Liquidity Guarantee Program (TLGP) that prosecutors say the bankers violated, continued his testimony from Thursday.

He explained the regulations were designed so that eligibility for the program, which guaranteed loans made to banks that needed short term loans, was to be determined by the borrower. Borrowers needed to certify they were eligible for the guaranteed loans, then report to the FDIC that they had taken the loan.

“We decided to do that because the program just wouldn’t have worked,” Burton said.

Littleton also called Jack Greeley, an Orlando attorney who represented Center State in its deal with Coastal, who described the difficulty he had obtaining from Baker an opinion letter stating Coastal was eligible for the guaranteed loan.

An attorney is never more exposed to liability that when they write an opinion letter, Greeley said, but it was critical to Center State that Baker give the opinion they needed before they made the $3.75 million loan Coastal needed to repay another bank.

“It was clear to me,” Greeley said. “If we don’t have that opinion we’re not going to close this loan.”

Baker never seemed confused about the TLGP requirements. He never sought clarification from Greeley, but Baker sent several drafts that Greeley found unacceptable. What he needed was an unequivocal statement that Coastal’s debt would be FDIC guaranteed. He needed Baker to take a “flat-footed” position.

“It’s either guaranteed or it’s not,” Greeley said. “Flat-footed. Black and white.”

Finally, Baker sent the letter Center State needed. Center State wired $3 million to Royal Bank of Canada and Coastal’s debt was repaid. Another $750,000 was wired to Coastal.

When Coastal failed, the FDIC repaid its debt to Center State.

Like at least one other witness for the government, Greeley has a deal with prosecutors that his statements can’t be used against him as long as he tells the truth. Defense attorneys have not yet had an opportunity to cross-examine him.

The trial continues next week.