Former Minnesota banker earns 18 months in jail for misappropriating more than $1.6 million in diamond, gold scheme

A Minnesota man who served as a bank CEO but who pleaded guilty to one count of making false entries in bank records – reportedly resulting in a misappropriation of more than $1.6 million – was sentenced to 18 months in prison and two years of supervised release, the inspector general for the federal insurer of bank deposits said Monday.

In a release, the Federal Deposit Insurance Corp. (FDIC) said Robert John Hager, 70, of Greenbush, Minn., entered the guilty plea last May in federal court in Minnesota. He was sentenced just last week (March 2).

The FDIC’s Office of Inspector General (OIG) said that according to the defendant’s guilty plea and documents filed with the court, Hager was the former CEO of Border State Bank and served as a director of the bank’s holding company, Border Bancshares, Inc., of Greenbush, Minn. He also held positions in other banks acquired by Border Bancshares, the agency said.

The agency said that in late 2015 and early 2016, Hager loaned money to a bank customer to invest in a diamond and gold venture in Liberia, Ghana, and Kenya. The FDIC said the ventures “promised a quick return.”

“After he depleted his own personal funds on the investment and maxed out the amount he could borrow from the bank, Hager asked other individuals, including bank customers, shareholders, and directors of the bank to lend him money, which would enable Hager to recover his personal funds,” the agency said.

According to the OIG release, between 2016 and 2017, Hager requested a series of loans by having Border Bank customers take out loans in their own names, or draw from loans they already had, and then transfer the funds to him. In May 2016, Hager issued three unauthorized standby letters of credit (SBLCs) worth $1.6 million to facilitate the purchase and delivery of diamonds and gold from Africa, the agency said.

“In each instance, Hager issued the SBLC on the letterhead of First Advantage Bank and signed the letter as CEO of First Advantage,” the agency said.

“Letters of credit” are considered obligations of a bank and can impact a bank’s financial standing, the agency noted. Such obligations must be entered into the bank’s general ledger so that they can be accounted for and tracked by regulators.

“In order to conceal his actions, Hager failed to report the SBLCs to bank personnel so that they could be logged into the bank’s system,” the FDIC said.

Former Bank CEO Sentenced To Prison For Falsifying Bank Records, Misappropriating More Than $1.6 Million