Wilmington Trust case: Feds say trust in banking, law enforcement requires prison sentence

Federal prosecutors have asked a judge to sentence four former Wilmington Trust executives convicted of fraud and other crimes to multiple years in jail when they are sentenced next week.

At that hearing, prosecutors will argue bank President Robert Harra Jr. and former Chief Financial Officer David Gibson deserve eight years in federal prison and that former Chief Credit Officer William North and former Controller Kevyn Rakowski should serve six and five years respectively, according to court documents filed Tuesday night. 

It's up to Delaware District Court Judge Richard G. Andrews to accept the prosecutors' recommendation or not demand any jail time. A host of Delaware elites — including former Governors Jack Markell and Mike Castle writing on behalf of Harra — have written the judge pleading that he spare the financiers time in prison. 

In pleading for a probation-only sentence, the defendants' attorneys have argued their crimes do not comport with their laudable family and personal histories.

In their reply, prosecutors argued prison time is required to preserve trust in both financial and law enforcement institutions. 

"The court is in a unique position to impose a sentence that sends a clear message to corporate executives that they, like all other criminals, will be held accountable for their criminal conduct, and held accountable in a similar way to others convicted of crimes," reads the sentencing memorandum submitted by U.S. attorneys. 

Each of the defendants was convicted of 15 federal crimes earlier this year, charges that included conspiracy to defraud the United States and making false entries in banking disclosure documents.

Prosecutors said the defendants systematically concealed and lied about hundreds of millions in past-due commercial loans in reports to regulators and investors in the wake of the 2008 financial crisis.

In 2010, executives raised $287 million in a 2010 stock offering while concealing the extent of its rotten loan portfolio. The next year, the once venerable Delaware bank and its $10.7 billion in assets were sold for $3.84 per share, a 71 percent drop from the price of the new shares issued just a year earlier. 

Bank executives collected huge bonuses, but shareholders watched the value of their stock plummet and hundreds of local jobs were lost. 

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"Many of the people harmed by these outcomes sit on the other side of the economic divide from defendants," prosecutors argued in their sentencing memo. "For these people, the loss of their savings or job is devastating."

Since securing the convictions, federal prosecutors have conceded to two defense-attorney requests that may limit the bankers' jail time or see them avoid prison altogether. 

Last week, prosecutors entered a joint request signed by defense attorneys asking Andrews to allow the defendants a "self-surrender" date in February if the judge sentences them to jail time next week. 

If the judge hands down a prison sentence, defense attorneys also want the court to allow the bankers to stay out on bail pending the appeal of their conviction, a process that could take years. Prosecutors oppose that move and have asked the court to schedule arguments on the request between sentencing and the self-surrender date. 

Earlier this fall, prosecutors also conceded that sentencing guidelines recommending life sentences for the bankers be off the table.

Prosecutors had been prepared to enter into evidence the total financial loss caused by the crimes, a number that when factored into the federal sentencing guidelines would have recommended life in prison, according to court documents. 

Defense attorneys opposed, saying that number could not be reasonably calculated and asked that the defendants' compensation during the 13-month period in which the crimes occurred be used instead.

Prosecutors agreed to the request, so the defendants' compensation — ranging between $294,000 and $583,000 — will be used in the guidelines, which recommend a minimum sentence of nine years for Gibson and Harra and eight years for North and Rakowski. 

In hundreds of pages of sentencing memoranda, defense attorneys argued that the bankers have already suffered pain and humiliation, have no chance of reoffending, have no prior criminal history and have lived exemplary lives of public service. 

More than 100 friends, family members, former colleagues and associates wrote Andrews on behalf of Harra, 69, recalling instances of charity and public service.

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Among the list include former governors, current Republican state lawmaker Colin Bonini, former Delaware Chief Justice E. Norman Veasey, former Delaware National Guard commander Gen. Frank Vavala and former Phillies owner Ruly Carpenter III.

"His combination of compassion, abilities, connections to the community and determination are sure to help more people if he is in the community than if he serves time behind bars," Markell wrote. 

Family members and associates of Rankowski, North and Gibson, 63,  also spoke about their work with local charities. Their crimes could more accurately be described as not stopping a longstanding practice, not actively seeking to deceive for their own greed, attorneys wrote. 

"There was no evidence presented at trial of any overt attempt to conceal or mislead; rather, this case involved the opposite — an open practice involving many," wrote attorney Kenneth Breen on behalf of Gibson. 

In reply, prosecutors listed numerous instances were Gibson committed "affirmative acts of dishonesty" in falsifying regulatory documents and failing to disclose the truth about the bank's financial health. They said maintaining an annual salary approaching $500,000 was motive. 

Thomas Foley, an attorney arguing for leniency for North, wrote that any loss caused by his client's crimes has been amply remedied, noting shareholders were paid $200 million settling a class action suit and the bank paid $60 million to the federal government. 

Each attorney argued the embarrassment and stress associated with the investigation, indictment and conviction was ample punishment. 

"The jury's verdict forever brands him with the Scarlet Letters 'L' for 'Liar' and 'F' for 'Felon,'" wrote attorney Thomas Foley on behalf of North. "That alone will always be the biggest punishment for Mr. North."

Prosecutors disagreed. 

"The mere fact of prosecution and conviction is not sufficient to meet the sentencing goals," prosecutors wrote.

Harra and Gibson are to be sentenced on Dec. 17. North and Rakowski will be sentenced two days later.

Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter.