Three California bankers were sentenced Friday to a combined nearly 24 years in prison for their roles in the 2010 failure of a Sonoma bank, based on their convictions in federal court late last year.
The failure of the bank caused more than $47 million losses to the federal bank deposit insurance fund and to the fund set up to protect banks from the financial crisis, the Troubled Asset Relief Program (TARP).
The court also ordered asset forfeiture of defendants’ interest in real estate worth approximately $20.8 million as proceeds of the crimes.
The Department of Justice (DOJ) and the Federal Deposit Insurance Corp.’s (FDIC) Office of General Counsel, in a release, said that Sean Clark Cutting and Brian Scott Melland, respectively the former chief executive officer and former chief loan officer of Sonoma Valley Bank (which failed on Aug. 20, 2010), were sentenced Friday for their December 2017 convictions for conspiracy, bank fraud, wire fraud, money laundering, falsifying bank records, lying to bank regulators, and other crimes. Cutting and Melland both received sentences of 100 months in federal prison, the agencies said.
Also sentenced was co-defendant David John Lonich for his December 2017 convictions for conspiracy, bank fraud, wire fraud, attempted obstruction of justice, and other offenses, DOJ and FDIC said. Lonich was an attorney for Bijan Madjlessi, the Marin and Sonoma County real estate developer who (according to the agencies), before his death in 2014, had been indicted on charges of bank fraud, wire fraud, attempted obstruction of justice, and other offenses. Lonich was sentenced to 6.6 years in prison.
According to DOJ, Cutting, Melland, and Lonich were involved in multiple schemes to defraud numerous financial institutions, including Sonoma Valley Bank, the FDIC, and the former California Department of Financial Institutions (DFI, now known as the Department of Business Oversight).
“The defendants’ fraud and other crimes caused the failure of Sonoma Valley Bank,” the agencies’ release stated. “Their crimes caused losses to taxpayers of over $47 million, as well as to the FDIC (approximately $39.18 million) and to the Troubled Asset Relief Program (TARP) (approximately $8.65 million) of the United States Treasury. Other victims included the shareholders of Sonoma Valley Bank who suffered losses when the value of their securities collapsed.”
“TARP is not a cookie jar, but that’s what Sonoma Valley Bank CEO Sean Cutting called it as he applied for $8 million in TARP dollars all while knowing he was committing a massive fraud that caused holes in the bank’s books,” said Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Christy Goldsmith Romero. “TARP was intended for healthy banks, not to fill holes in fraud-riddled bank books. Former bank CEO Cutting and chief loan officer Brian Melland will now spend years in prison after causing the bank to collapse under the weight of their fraud, leaving taxpayers who funded TARP at a loss of $8.6 million,” Romero added.
On Monday, the FDIC reported it had terminated the receivership of Sonoma Valley Bank, effective Aug. 1.