Former bank CEO draws prison term, ordered to pay $137 million to FDIC, former investor

A former president and board chairman of a now-defunct Oklahoma bank was sentenced to four years in federal prison for making a false statement to the Federal Deposit Insurance Corp. (FDIC) and was ordered to pay $137 million in restitution for his part in the bank’s failure, according to a release Monday.

John Arnold Shelley, 68, was the president, chief executive officer, board chairman, and a loan officer at The Bank of Union in El Reno, Okla., from the late 1990s until he resigned Nov. 30, 2013. The bank was closed by state banking regulators in January 2014 because of loan losses; the FDIC was appointed receiver.

The U.S. Attorney’s Office for the Western District of Oklahoma, in Monday’s release, said a federal grand jury in December 2016 returned a 23-count indictment against Shelley in connection with the bank’s failure. The counts included bank fraud, money laundering, making false statements to a bank, misapplication of bank funds, false bank entries, wire fraud, and making false statements to the FDIC.

On Sept. 18, 2017, Shelley pleaded guilty to making a false statement to the FDIC on July 30, 2013, when he falsely represented in writing that the bank had total equity capital of $36,290,000 though he knew the bank’s equity capital was significantly less. The indictment also said he defrauded a partial owner and investor in the bank by persuading him to wire $40 million by falsely representing that the bank was growing rapidly and performing well; in fact, it was near failure, the release says.

Shelley was sentenced Dec. 14 and given a prison term “well below” the range suggested in federal sentencing guidelines because of his health, personal history, and other factors, the release says. It says that after release from prison, Shelley will serve two years on supervised release.

The sentence also requires Shelley to pay $137,384,291 in restitution, of which $40 million is for the defrauded investor. The release says Shelley owes the remaining $97,384,291 to the FDIC, which lost money when it assumed the bank’s liabilities in January 2014.

The release notes this case is the result of an FDIC Office of Inspector General and the Federal Bureau of Investigation’s Oklahoma City Division.

Former Bank President Sentenced to Prison and Ordered to Pay $137 Million