A Clive businessman who pleaded guilty to fraud charges stemming from the 2014 collapse of Quad Cities-based Valley Bank was sentenced to 14 months in federal prison.
Michael Slater, founder and former president of Clive-based Vital Financial, and former Valley Bank president Larry Henson, pleaded guilty in November to conspiracy to commit wire fraud affecting a financial institution.
Slater, 65, of Clive was sentenced to 14 months in prison April 22 and ordered to pay back $4.5 million. He will be on probation for three years after his prison sentence ends.
Moline, Illinois-based Valley Bank had 15 offices, all but one of which was located in Iowa. In June 2014 Illinois bank regulators shut down the bank. The Federal Deposit Insurance Corporation then arranged the sale of the bank's assets to Missouri-based Great Southern Bank.
Slater, Henson and other Valley Bank employees allegedly engaged in a scheme to defraud the Small Business Administration. They engineered loans so that it appeared borrowers qualified for Small Business Administration guarantees on loans, according to the Iowa Capital Dispatch.
The three loans identified in court filings ranged from $4.6 to $5 million and were taken out by businesses in Kentucky and Florida. In 2011 and 2012, according to prosecutors. Valley leaders sought to refinance the troubled loans with the Small Business Administration, which would then guarantee them against failure.
In order to qualify for Small Business Administration financing, court records show, Slater coached Valley Bank officials on how to falsify their bank records. Examples included erasing evidence of past overdue loan payments and resubmitting failed applications under new company names.
Prosecutors said many of the documents were submitted directly to the Small Business Administration by Slater, whose company specialized in helping companies secure SBA-backed loans. Two of the three loans later defaulted, causing losses to the Small Business Administration of more than $4.5 million.
Complete loan guarantee applications included false statements about borrowers' eligibility to receive loans and about their eventual disbursement of the loan proceeds, according to the Capital Dispatch.
Slater was also accused of calling Henson to suggest a variety of ways to conceal risky loans from the SBA.
Vital Financial was acquired in 2017 by Reinbeck-based Lincoln Savings Bank. President and CEO Erik Skovgard said Lincoln had no knowledge of the fraud or investigation until November when it accepted Slater's resignation.
Henson was sentenced in March to nine months in federal prison for men who require specialized or long-term medical care. Henson must spend five years on probation after his release and must pay back $4.5 million.
This article originally appeared on Des Moines Register: Iowa businessman sentenced to 14 months in prison for bank fraud