Bank Executive Sentenced to 5 Years in Prison Over $15 Million Fraud

A former banking executive has been sentenced to five years in prison for a $15.2 million fraudulent loan scheme involving 26 banks in Kansas.

Authorities announced on Tuesday that Chief U.S. District Judge Julie A. Robinson had sentenced Troy Gregory, of Lawrence, Kansas to 60 months in prison, followed by 3 years of supervised release and more than $4.7 million in restitution for carrying out the scheme.

The fraudulent loan was initiated in 2007 after Gregory, a senior lending officer at University National Bank in Lawrence, had already given a large loan a group of developers for a speculative single family housing project near Junction City, Kansas, according to the Kansas City Business Journal.

The housing project was aimed at U.S. Army soldiers stationed nearby but was not successful due to the soldiers preferring to rent properties rather than buy houses in the area, causing the developers to struggle to make payments on the loan.

Gregory, 53, then initiated a new loan for the same group of developers, convincing 25 other banks to join with his own to help fund the building of an apartment complex. However, the new loan was really made so that the borrowers could pay back their previous loans, prosecutors said.

Gregory misrepresented the financial status of the borrowers to convince the other banks to participate in the loan, did not disclose debts on the apartment property and falsely claimed that the developers had about $1.7 million in certificates of deposit to use as collateral on the loan.

Money and Gavel
Troy Gregory, 53, was sentenced to five years in prison and ordered to pay more than $4.7 million in restitution after being found guilty on charges related to a $15.2 million bank fraud scheme. Avosb/Getty

After the loan was made, Gregory used the funds to pay down the apartment property debt and make payments on unrelated loans. He also used $1 million of the loan to buy some of the certificates of deposit that had been pledged as collateral.

The housing market then crashed, leading to a lower-than-expected appraisal for the apartments and pushing the loan into default. The other banks, which would not have participated in the loan without Gregory's false assurances, were forced to write off debts and lost approximately $5 million.

Gregory had been indicted in the scheme in November 2017, charged with four counts of bank fraud, two counts of making false statements and one count of conspiracy to commit bank fraud. He was convicted of all charges except for the conspiracy charge after a two-week trial in August 2019.

Sentencing had initially been set to take place in January but was postponed after former U.S. District Judge Carlos Murguia, who presided over the trial, was reprimanded for unrelated sexual misconduct, later resigning from the court.

Although Gregory was sentenced to 5 years, the charges the former executive was convicted of carried combined maximum sentences of 70 years. The case was investigated by the FBI, the IRS, the Federal Housing Finance Agency Office of Inspector General and Federal Deposit Insurance Corporation Office of Inspector General. It was prosecuted by the Department of Justice's Criminal Division.

Newsweek reached out to the Department of Justice for comment.