Pittsburgh Woman Gets 6 Years In Bank Failure
PITTSBURGH ( AP)– The former vice president of a tiny Pittsburgh bank that failed in 2007 will spend six years in federal prison for underreporting more than $7 million in delinquent loans that led to the bank’s demise.
Donna Shebetich, 46, was vice president, director and loan officer for Metropolitan Savings Bank in the city’s working-class Lawrenceville neighborhood when she filed five false quarterly reports with the Federal Deposit Insurance Corp. in 2005 and 2006 that hid more than $7 million in delinquent loans before it was shut down in February 2007 with just $15.8 million in assets.
Assistant U.S. Attorney Carolyn Bloch said Shebetich filed the fake reports, in part, to hide $2.7 million in “unbooked’’ loans– that is, loans not recorded in the bank’s ledgers – to friends or associates, including a boyfriend who also happened to be one of the bank’s six board members and because, Bloch contends, Shebetich used some money to pay for alcohol and cocaine.
“She made $32,000 a year,’’ Bloch told the judge. “Clearly she could not afford her cocaine habit, her alcohol habit, on that income.’’
Bloch wouldn’t comment on whether other people might face charges in the investigation and Shebetich’s boyfriend, who has not been charged but attended her sentencing, declined comment.
When then Pennsylvania Department of Banking closed Metropolitan its assets were taken over by Allegheny Valley Bank so its 1,450 customers could access their money.
Once regulators plowed through the bank’s other shoddy record-keeping – including more than $200,000 in cash missing from its vault and nearly $3 million from the bank’s own checking account – the FDIC covered losses of up to $100,000 per customer as required by law The FDIC also paid 40 cents on the dollar for losses above the $100,000 threshold but 24 customers, some of them elderly or people who had their life savings in the bank, still lost nearly $535,000 combined after the FDIC paid out $10.2 million.
Some mortgage customers also had their homeowners insurance canceled and were past-due on property taxes because escrow funds were not properly maintained.
Allan Becer, 60, lost nearly $60,000 after the FDIC covered his other losses.
“One of the reasons I put money in Metropolitan was because of its reputation. It was a respected bank that had been there since the early 1900s,’’ said Becer, who added that he has come to accept the “reality’’ of losing his money. “And I would hope Donna Shebetich would accept the reality of what she did to me.’’
Shebetich didn’t comment during or after the sentencing hearing, but her attorney, David DeFazio, blamed much of what happened on the bank’s other five board members – none of whom were charged – and its small staff: Shebetich, two tellers, and another employee who didn’t have a specific title but assisted Shebetich.
The bank’s board “overworked an ill- equipped woman who was elevated to a position well above her competency level,’’ DeFazio said.
But Bloch, the prosecutor, and Carlo Veltri, a senior bank examiner for the FDIC who testified Friday, suggested the bank wasn’t understaffed for its size and noted that Shebetich ran it well for several years before the problems surfaced.
Shebetich pleaded guilty earlier this year to filing a false quarterly report in November 2006 that listed $0 worth of delinquent mortgages, even though she knew the bank had more than $7 million at least 30 days past due. She acknowledged as part of that plea that four previous quarterly reports were also false.
The sentencing hearing ended up being a commentary, of sorts, on the state of white collar crime and banking in America because U.S. District Judge Arthur Schwab refused to sentence Shebetich to between 10 and 121/2 years in prison based on federal sentencing guidelines driven largely by the FDIC’s $10.2 million loss. Shebetich must repay the agency at least $50 a month after she gets out of prison and Bloch argued a guideline sentence was warranted given the harm to the victims.
But Schwab noted that Raj Rajaratnam, a hedge fund founder who earned up to $75 million in an insider trading scheme, received just 11 years in prison from a federal judge in New York City last month. Schwab said it would be unjust in the “marketplace of sentencing’’ to give Shebetich as much time.
Becer said he understood the judge’s rationale and thought the sentence was fair, but said his confidence has been shaken in smaller banks at a time when many Americans are coming back to them. He deposited money with Metropolitan because “it was a small neighborhood bank that you could trust.’’