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HEINEFormer Bank of Oswego president and CEO Dan Heine was arrested in Florida on Friday and arraigned on federal charges involving conspiracy to commit bank fraud and making false bank entries.


Diana Yates, the bank's former chief financial officer, also was arrested and arraigned on the charges Friday in Portland. Both pleaded not guilty and were released Friday afternoon.

The 27-count indictment alleges a complex scheme to hide bad loans from the bank's board of directors, shareholders and regulators from September 2009 through 2014 in an effort to portray the bank’s financial condition as much better than it was.

The grand jury indictment, which was unsealed on June 24, accuses Heine and Yates of using bank or third-party proceeds to make payments on customers’ delinquent loans, mischaracterizing assets in reports to the bank’s board of directors and the Federal Deposit Insurance Corporation (FDIC), and concealing information about loans made to bank insiders.

The indictment also alleges that Heine and Yates made false entries in the bank’s reports to the FDIC and to the board of directors about the status of various loans and transactions.

The 15-page indictment includes one count of conspiracy to commit bank fraud and 26 counts of making false bank entries, reports and transactions. If convicted, Heine and Yates face a maximum of 30 years in prison for each count, as well as the forfeiture of any money or property obtained as a result of the violations.

“Our community and economy depend on the integrity of our financial institutions and the officers charged with ensuring their safety and soundness,” Acting U.S. Attorney Billy J. Williams said this week. “Officers who make material misrepresentations about these institutions’ financial well-being will be prosecuted in this district.”

YATESHeine has denied any wrongdoing in the past, telling The Review in April that "the notion that I was personally involved in a scheme or scandal to conceal problem loans and delinquencies from the bank’s examiners is preposterous."

Heine told The Review that when he discovered "internal irregularities," he reported them to the board and to federal and state regulators, and said bank officials then "fully cooperated" with a two-year investigation.

Geoff Walsh, the bank’s former senior vice president of lending, was later indicted and is scheduled to go on trial July 28 on fraud charges related to activities that Heine described as occurring "before and after his employment with the bank."

Yates could not be reached for comment. Reached at his Florida home on Saturday morning, Heine said "I am advised to make no comment."

Heine was supposed to appear in U.S. District Court in Oregon this week, although he told The Review on Saturday that medical issues could affect the timing of his return to the state.

The Federal Bureau of Investigation and the FDIC’s Office of the Inspector General conducted the investigation. Assistant U.S. Attorneys Claire Fay and Michelle Holman Kerin are prosecuting the case.

“Americans have a right to expect that their financial institutions — and the people who run them — are working to keep their money safe and secure,” said Greg Bretzing, special agent in charge of the FBI in Oregon. “When that trust is broken, the impacts on the community, the shareholders and the customers are very real. As alleged in this indictment, the damage estimates can soar into the millions of dollars.”

According to the indictment, Heine and Yates authorized payments on behalf of delinquent borrowers using funds obtained through false statements or omissions, often without the knowledge of the borrower. Some of those funds came from Walsh’s personal bank account, the indictment claims, after being supplied by a third party.

For example, the indictment says, Heine and Yates recommended in 2010 that the bank loan $1.7 million to Portland real estate developer Marty Kehoe, who is identified only as M.K., without disclosing to the bank's internal loan committee that the bank had already loaned Kehoe $675,000. Part of the proceeds of the loan were used to cover payments for other bank customers, whose delinquent loans would otherwise have been reported to the board and to regulators.

The indictment also alleges that Heine and Yates recruited a bank employee in 2011 to act as a “straw man” in a phony real estate transaction designed to conceal a financial loss involving foreclosed property on A Avenue in Lake Oswego.

Rather than report the loss, the indictment alleges, Heine and Yates authorized the use of bank funds to repurchase the property, writing two checks to the bank employee totaling $267,727. After closing on the property, the “straw man” — who had claimed in purchase documents that the money came from his own personal funds — then signed over the property to the bank, the indictment says.

Four months later, the indictment says, Heine and Yates recruited a third party to buy the house from the bank for $355,000, making false statements or omitting key facts from the board along the way.

The overall goal of the conspiracy, the indictment says, was to hide the number of bad or “nonperforming” loans the bank had made and the size of the cushion it had set aside to cover those bad loans.

“If too many of a bank’s loans are nonperforming, the bad loans will erode the bank’s equity cushion, which could cause the bank to fail,” the indictment says. “Likewise, if there is not enough equity in a bank, the bank will not be able to absorb very many bad loans and the bank may fail.”

By misrepresenting the ratio of bad loans to reserves, the indictment says, Heine and Yates put The Bank of Oswego in a position to do just that.

Contact Gary M. Stein at 503-636-1281 ext. 102 or This email address is being protected from spambots. You need JavaScript enabled to view it..

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