WILMINGTON, Del. (AP) — A former Wilmington Trust executive accused of scheming with another bank executive to make improper loans to each other from their respective banks pleaded not guilty Wednesday to federal bank fraud, conspiracy and money laundering charges.
Brian D. Bailey, 51, appeared in court for a brief arraignment, where his lawyer waived a reading of the indictment against Bailey and entered a plea of not guilty on his behalf.
A few minutes later, in a conference with the judge assigned to the case, prosecutors indicated that they may file additional charges against Bailey.
"It's certainly something that's out there and we've discussed at length," Assistant U.S. Attorney Robert Kravetz told Judge Richard Andrews.
Kravetz did not provide any details about the potential for additional charges.
Andrews held off on setting a trial date after Kravetz and defense attorney Richard Weir indicated that they likely could not be ready for a trial in July, as Andrews had suggested.
"I just want to get an idea of the complexity of this case," Weir told the judge.
Andrews scheduled another status conference for March 18 to discuss pretrial issues, including prosecutors giving documents to the defense.
The indictment of Bailey, a former vice president and Delaware market manager for Wilmington Trust, is the latest development in an ongoing federal investigation of lending practices at the bank, which was sold to M&T Bank Corp. in 2010 after its deteriorating loan portfolio left it on the verge of collapse.
Authorities allege that Bailey and James Ladio made roughly two dozen loans and loan modifications to each other over more than a decade, starting in 2001.
Ladio, 57, is a former chief lending officer for Artisans Bank and later served as president and CEO of MidCoast Community Bank, which terminated him in August. He pleaded guilty to bank fraud and money laundering charges in December. His sentencing is scheduled for April 17.
Prosecutors say the scheme defrauded Wilmington Trust, Artisans and MidCoast, where Bailey worked as a loan officer after resigning from Wilmington Trust in May 2010. Authorities say the two men concealed from the banks that they had authorized loans to each other, misrepresented the purposes for the loans or were "willfully blind" to their true nature, and failed to conduct basic underwriting functions.
Authorities also allege that the men used their authority as commercial lenders to originate commercial loans and lines of credit for what they knew to be consumer debt purposes, circumventing the normal approval process and loan terms, and provided loan accommodations to each other that weren't available to the general public.
Bailey was asked to resign from MidCoast last May after a former Wilmington Trust colleague, Joseph Terranova, pleaded guilty to conspiracy to commit bank fraud. Terranova also is awaiting sentencing.
In addition to the criminal investigation, Wilmington Trust is the subject of a securities class action lawsuit alleging that senior officers and executives portrayed the bank as a conservative lender but in fact played fast and loose with the company's real estate loan portfolio, perpetrating a fraud that led to the demise of the 107-year-old bank.