The leaders of a state-chartered bank in Wilmette that failed in 2012 were formally arraigned Tuesday on fraud charges alleging a criminal shakedown scheme and using bank funds to finance personal projects.
All told, the failure of Premier Bank in March 2012 cost taxpayers about $70 million dollars -- of that, $6.8 million came as a bailout from the U.S. Department of Treasury's Troubled Asset Relief Program, as well as $64.1 million backed by the FDIC.
The bank's chairman, his wife and two board members appeared Tuesday in Cook County Criminal Court to be arraigned on multiple charges each. They are: Zulfikar Esmail, 70, of Evanston; Shamim Esmail, 65, of Evanston; Robert McCarty, 51, of Geneva; and William Brannin, 53, of Chicago.
"The perpetrators of this criminal enterprise are charged with using taxpayer funds to further their own shakedown scheme at time when our country was on the brink of disaster," said Attorney General Lisa Madigan in a statement. "Their brazen actions to cover up this fraudulent scheme led to the failure of Premier Bank at the expense of its trusting customers and American taxpayers."
An attorney for Zulfikar Esmail denied the charges against him during the court hearing, where he pleaded innocent, according to Crain's Chicago Business.
"There is no evidence of wrongdoing by Dr. Esmail and this is overreaching by the Illinois attorney general's office. We're going to be looking forward to establishing Dr. Esmail's innocence," said Chris Gair, Esmail's attorney.
The indictment alleges that the four leaders hid the bank's declining financial condition from state regulators between 2006 and 2012, all the while taking bribes in exchange for business loans and lines of credit.
In one such deal, officials say, the bank loaned money to open Michael's Fresh Market grocery stores in Naperville, Downers Grove and Hyde Park. In exchange, Zulfikar Esmail demanded his grown children receive ownership stakes in the stores.
In another, Zulfikar Esmail had construction work done on his rental properties and his home -- including the construction of an underground tunnel -- and had fraudulent invoices drawn up to make it appear as if the work was done at the bank, officials said.
To cover up the true condition of the bank, officials say they used money from a third party to pay loans that were past due.
In 2008, as the bank neared failure, officials say the four used fraudulent bank records to apply for the $6.8 million federal bailout loan.
"We are pleased to join our law enforcement colleagues in announcing today's charges. The FDIC Office of Inspector General is committed to investigating and prosecuting cases where trusted insiders abuse their positions and engage in activities that harm their institutions," said John Lucas, Special Agent in Charge, FDIC Office of the Inspector General's Office of Investigations. "The alleged fraud in this case contributed to Premier Bank's failure and corresponding losses to the Deposit Insurance Fund. We will continue to pursue such threats to the safety and soundness of FDIC-insured institutions throughout the country."
Zulfikar Esmail was charged with: financial institution fraud, organizer of a financial crimes enterprise, continuing a financial crimes enterprise, theft by deception, commercial bribery of a financial institution and conspiracy to commit a financial crime.
Shamim Esmail, Robert McCarty and William Brannin were charged with financial institution fraud, continuing a financial crimes enterprise and conspiracy to commit a financial crime, and theft by deception.
The case was investigated by the Office of the Special Inspector General for TARP and the Office of the Inspector General of the FDIC.