Regulators should not have forced the closure of BestBank of Boulder, one of the best-performing financial institutions in the country when it collapsed in 1998, a defense attorney for one of three former bank executives charged with fraud said this morning.
The government alleges that the former bank executives conspired to hide delinquent accounts to fraudulently inflate revenue and enrich themselves with millions of dollars in bonuses.
“It was the regulators who were pulling the deception on the bankers,” defense attorney Daniel Sears said today during his opening statement in a Denver federal court.
Sears represents former BestBank chief financial officer Jack Grace.
Grace, former bank chief executive Edward Mattar and former president Thomas Alan Boyd face 95 counts of conspiracy, fraud and other charges. Opening statements began Tuesday. The prosecution is expected to begin presenting its case today. The trial could last up to 10 weeks.
Rather than forcing the bank to close, Sears said regulators should have taken a different path, such as asking the bank’s board of directors to fix any regulatory concerns.
BestBank issued credit cards to subprime borrowers at 18 percent interest.
A federal prosecutor said during his opening remarks Tuesday that the bank had lax credit requirements and four out of five of the bank’s accounts defaulted. The bank “re-aged” the defaulted accounts, or made them current, so it could still book the revenue it would earn on interest.
However, Sears said today that 35 to 40 percent of the bank’s credit card accounts were current. A 20 percent performance is considered “pretty good” in the subprime market, he said.
Staff writer Andy Vuong can be reached at 303-820-1209 or avuong@denverpost.com.
