Community One Bank to pay $400,000 to Simmons' victims
A North Carolina bank with branches in Boone and West Jefferson received federal sanctions for not protecting victims of Keith Franklin Simmons' fraudulent investment scheme, according to a Department of Justice report.
CommunityOne Bank, based in Asheboro, entered into a deferred prosecution agreement on April 27 with the Department of Justice for not having an effective anti-money laundering program. The bank has agreed to pay $400,000 - 16 percent of its total value- in restitution to the victims of Simmons' scheme.
As part of the deal with federal prosecutors, the bank's parent company, FNB United Corp., was allowed to merge with Bank of Granite and a enter into a recapitalization, a must for the bank's survival.
Simmons, the former controller of Black Diamond Capital Solutions in Jefferson, was convicted in December 2010 of defrauding 400 investors of more than $40 million from April 2007 to December 2009.
Many of his "investors" included elderly residents who were defrauded their entire life savings, reports claim. The victims were scattered across the country, with some as far away as California.
Federal documents now point a finger of blame to CommunityOne for not protecting his victims from his scheme. As part of the agreement, the bank must also implement proper anti-money laundering measures as outlined under the Bank Secrecy Act.
That piece of legislation requires banks to maintain programs to detect and report suspicious activity related to criminal activity.
A bank is also required to file a suspicious activity report if it suspects money laundering, which according to the DOJ, CommunityOne did not do - despite hundreds of suspicious transactions.
According to court documents, bank records show that Simmons diverted more than $2 million to other bank accounts and diverted nearly $800,000 in cash withdrawals with transfers to his personal account to support his "luxurious lifestyle."
"CommunityOne turned a blind eye to criminal conduct occurring under its noise," said U.S. Assistant Attorney General Lanny Breuer. "By agreeing to pay restitution to the victims of a customer's investment fraud scheme and to overhaul its anti-money laundering program, the bank has begun the process of righting its wrongs.
"We will take every necessary step to hold banks committing similar offenses to account."
Simmons is awaiting sentencing and faces a maximum of sentence of 80 years.