PANAMA CITY — Prosecutors say they have obtained evidence that one of three bankers charged with bilking the government out of millions of taxpayer dollars had done the same thing to a local investor.
Terry Dubose knew federal regulators were about to clamp down on Coastal Community Investments, a holding company for Panama City Beach-based Coastal Community Bank and Port St. Joe-based Bayside Savings Bank, when he sought out investors to buy shares in the bank so he could avoid personal losses, according to a filing by Assistant U.S. Attorney Gayle Littleton.
Dubose, Elwood West and Frank Baker have been charged with conspiracy to commit wire fraud against the Federal Deposit Insurance Corporation (FDIC), seven counts of wire fraud, three counts of lying to the FDIC and aiding and abetting a false claim against the United States. Dubose and West were executives with Coastal, and Baker was the company’s attorney and largest shareholder.
They have pleaded not guilty and are scheduled for trial in federal court next month. Dubose has said he will not comment on the case.
Because they have pleaded not guilty, Littleton will have to prove the men purposely defrauded the FDIC’s Temporary Liquidity Guarantee Program, which was created to help banks borrow money from each other at the onset of the Great Recession.
Littleton wants to convince jurors Dubose lied to the investors in order to prove motive, intent and lack of mistake, even though he has not been charged with a crime in connection to the alleged scheme. Dubose’s attorneys had not filed an objection as of Friday.
The FDIC was about to issue a cease-and-desist order against Coastal, and Dubose knew that would render shares in the bank unmarketable when he approached Charlotte Newby and John McVeigh in late 2008 and tried to convince them to buy stock in the bank, according to court records.
Newby and McVeigh, who could not be reached for comment, declined the offer, but when Dubose returned in early 2009, he sweetened the deal: The bank would lend them the money to buy the stock, which Dubose told them belonged to a “retired old lady” who wanted her money in more conservative investments, the court records state.
They borrowed $140,000 for the stock, and even though Dubose had been telling people it’s illegal for a bank to finance the purchase of its own stock, he signed the loan memorandum that concealed the purpose of the loan. The stock Newby and McVeigh bought actually belonged to Dubose’s daughter, who had purchased the shares with money Dubose had loaned her; she used the proceeds from the sale to repay Dubose, according to the court records.
Three weeks after Dubose was made whole, the FDIC issued a cease-and-desist order. When the bank failed in 2010, the shares Newby and McVeigh bought were worthless.