Millions in hidden deposits revealed

2/23/2002

OAKWOOD, Ohio - Two sets of financial books concealed about $42 million in deposits at Oakwood Deposit Bank Co., some of which were uninsured.

It turns out that the 97-year-old bank that failed Feb. 1 had deposits of $102 million, not the $60.2 million reported by the Federal Deposit Insurance Corp. and FBI when they took over the bank, accusing bank chief executive Mark S. Miller of embezzling $40 million.

The additional deposits boosts the amount of money not covered by the FDIC, which insures accounts for up to $100,000. Regulators told The Blade yesterday that at least $3.7 million and as much as $9 million in Oakwood deposits are uninsured, up from the initial $2.9 million estimate.

“It all boiled down to two sets of books,” said David Barr, an FDIC spokesman in Washington.

The agency that regulated the bank based its initial estimates on Oakwood's year-end financial figures that were on a computer, he said, but investigators quickly found other records, including some in Mr. Miller's home, that were not entered into the normal reporting system.

An FBI affidavit said Mr. Miller, who confessed to the embezzlement, had admitted receiving money for certificates of deposit sold over the Internet but not listing them on the bank's books, and that he altered the books to show that CDs were paid off so that he could send money to Stardancer Casino Cruises, an East Coast gambling boat operation he and his brothers partly owned.

The FDIC said at least $93 million of the bank's deposits are insured. It knows that $3.7 million is not, being declared over the agency's stipulated limit. It is unclear whether the remaining $5.3 million is insured, Mr. Barr said, but the agency is trying to determine that.

Also unknown is how much of the additional uninsured deposits affect northwest Ohio public entities, hard-hit by budget shortfalls. It was estimated this month that about $2.4 million of over-the-limit Oakwood deposits belong to communities, school systems, hospitals, and other public entities, some of which may face layoffs or cutbacks in projects.

Some over-the-limit depositors will get a break if they had loans with Oakwood bank, because they can use the uninsured portion of their deposits to pay off the loans without affecting their insured funds, Mr. Barr explained.

“We're still in the process of unraveling all that,” he remarked. FDIC is still auditing the Oakwood bank's books and trying to pinpoint all of the bank's assets. “Within a week or two we hope to have a good determination [on what deposits are insured].”

Regulators initially reported that the bank had assets of $72.3 million, or about $12 million more than the deposit amount. A new asset level was not provided, but Mr. Barr said the $40 million fraud amount has not changed nor has his agency's $47 million estimate of cost to cover the insured accounts and other expenses. Mr. Miller, the bank's former leader, has been charged and is free on a $1 million property bond pending trial in U.S. District Court in Toledo. Defiance-based State Bank and Trust Co. has received a windfall from the added deposits.

“We were pleasantly surprised,” said Tina Farrington, a senior vice president for Rurban Financial Corp., which owns State Bank and Trust. Rurban bid just over $4 million to get Oakwood bank's $57.3 million worth of insured deposits, and it reopened the bank Feb. 4.

The extra money means State Bank has that available to loan out or to invest to make money, a jackpot that could pose problems for a smaller bank. “It's a win-win situation,” Ms. Farrington said.

The $93 million in insured deposits acquired from the main Oakwood office and its branch in nearby Grover Hill likely will boost Rurban's assets to well over $800 million. Rurban reported that its assets totaled $726 million at the end of last year's third quarter. The company is to announce its year-end figures Monday.

Nearly all of Oakwood's 3,000 households stayed with State Bank, which has hired all 15 employees of Oakwood, Ms. Farrington said. State Bank is assuming some of Oakwood's loans but not all, she added.

Rurban also owns People's Banking Co. in Findlay, Citizens Savings Bank Co. in Pemberville, and the First National Bank of Ottawa.