Apparently there are differences of opinions as to what, exactly, “too big to fail” means.
When the now-defunct Park Avenue Bank went south, the FDIC issued a press release that seemed to indicate that this was just another case of a failed bank. In fact, if you read the FDIC Failed Bank Information Sheet, it all seems rather unremarkable.
But behind the scenes, what was going on was rather remarkable indeed. It was a story of greed, corruption, and yes, more than a little bit of tax fraud.
The story of Park Avenue Bank didn’t become remarkable until about two and a half years ago, when the Department of Justice announced that former bank president Charles Antonucci had been arrested on charges of “self-dealing, bank bribery, embezzlement of bank funds, and fraud, among others.” Your run of the mill fraud charges, right? Not exactly. Antonucci eventually pleaded guilty to many of those charges and sealed his fate in history as the first person convicted of attempting to steal from the Troubled Asset Relief Program, or TARP. That’s right, the bank bail-out program. It seems that it wasn’t so much the bank that needed bailing out as Antonucci and his pals. Antonucci was funding a lifestyle that allowed him to fly for free all around the world to such events as the Super Bowl and the Masters’ Golf Tournament – all while plotting to use funds from TARP for the “troubled” bank.
Eventually, Antonucci’s lifestyle caught up with him, and as you’d expect, investigators found that the greed wasn’t restricted to just one person: he was sharing the wealth. This week, the Department of Justice announced the arrest of Wilbur Huff, 51, on thirteen counts related to Park Avenue Bank. Prosecutors also announced the arrest of Matthew L. Morris, the former senior vice president of Park Avenue Bank, and Allen Reichman, the former executive director of investments at another investment bank and financial services company in an investigation they referred to as “ongoing.”
Huff, who has since posted bail and is now on home detention in Kentucky, was allegedly at the center of multiple counts of fraud amounting to more than $100 million. Among the counts that stand out: $50 million worth of tax fraud.
I know what you’re thinking. You’re thinking he skimmed money from the bank and didn’t report it. That’s what we’re used to seeing in these cases. But Huff’s fraud is a bit more sophisticated than that.
For about three years (2008 through 2010), Huff is said to have controlled a payroll company. Other companies – like the one you probably work for – depend on payroll companies to calculate and remit their payroll taxes to the Internal Revenue Service (IRS). Payroll taxes include the Social Security, Medicare and federal income tax withholding and other amounts such as worker’s compensation insurance that either comes out of your paycheck or as in the case of Social Security and Medicare, are matched by a contribution from your employer.
But Huff’s payroll company didn’t remit those taxes or withholdings to IRS or to the insurance company. Instead, that money, allegedly more than $50 million, flowed to Huff through – you guessed it – Park Avenue Bank. He used the money, according to prosecutors, to support an expensive lifestyle which included “mortgages on Huff’s homes, rent payments for Huff’s children’s apartments, staff and equipment for Huff’s farm, designer clothing, jewelry, and luxury cars.”
The case has been assigned to U.S. District Judge Naomi Reice Buchwald, and the first conference is scheduled for next week, October 10, 2012.
