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Former Wilmington Trust official sentenced for conspiracy

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(AP) — A former Delaware bank official who cooperated with authorities in an investigation that led to the convictions of four top executives for Wilmington Trust, the only financial institution to be criminally charged in connection with the federal bank bailout program, was sentenced Tuesday to almost two years in prison.

Joseph Terranova, 51, was sentenced to 21 months behind bars, more than five years after pleading guilty to conspiracy to commit bank fraud and agreeing to cooperate with federal investigators. He also must pay a $15,000 fine.

Terranova’s sentencing brings an end to a lengthy criminal probe into the downfall of a bank that was founded by members of the du Pont family and foundered more than a century later after the real estate market collapsed following the 2008 recession.

“I am deeply sorry for the crimes I committed,” Terranova, a former bank vice president and loan officer, said before U.S. District Judge Richard Andrews sentenced him. “Every day, I struggle with feelings of shame, guilt and remorse.”

Terranova’s attorney, Patrick Cotter, requested home confinement and community service, noting Terranova’s cooperation with law enforcement, and the volunteer work he has done with his church and with Alcoholics Anonymous since his arrest.

Sending Terranova to prison would destroy a “complex and important web of support” upon which Terranova relies while at the same time providing support to others, Cotter argued. He also said there was no need to send a message that financial industry crimes won’t be tolerated.

“The seriousness of what happened at Wilmington Trust, in my opinion, has been established beyond a reasonable doubt,” Cotter said, noting the sentences given to other defendants and the $260 million paid by the bank to settle its criminal case and a class-action shareholder lawsuit.

Prosecutor Jamie McCall said that despite his cooperation, which included wearing an FBI wire to secretly record his conversations, Terranova deserved prison time. He noted that Terranova’s misconduct stretched over several years and included altering loan documents, abusing bank lending rules, and misrepresenting the status of past-due commercial real estate loans.

McCall also pointed to Terranova’s relationship with businessman Michael Zimmerman as an example of the lax way in which Wilmington Trust doled out money to developers in central and southern Delaware.

“Send $1,000,000 ASAP I have to pay my bar tab,” Zimmerman wrote to Terranova in 2008. He got the money.

Earlier, Wilmington Trust wired $1 million to an account controlled by Zimmerman for a commercial project, although Terranova reminded Zimmerman that an executed lease and plan approval were conditions for such funding.

“However, not wanting my reputation for reckless abandon to be in jeopardy, I guess we can fund the $1,000,000,” Terranova wrote.

Zimmerman died while awaiting trial on charges of conspiracy, money laundering and making false statements to a financial institution.

Terranova, meanwhile, reached a plea agreement with prosecutors in 2013 and began cooperating with investigators. He testified last year in the fraud and conspiracy trial of former Wilmington Trust president Robert Harra Jr., former chief financial officer David Gibson, former chief credit officer William North and former controller Kevyn Rakowski.

Harra and Gibson were both sentenced last month to six years in prison and ordered to pay fines of $300,000 each. North received 4½ years in prison and a $100,000 fine, while Rakowski was sentenced to three years. All four are seeking to remain free on bail while appealing their convictions.

Prosecutors say the executives misled regulators and investors about Wilmington Trust’s massive amount of past-due commercial real estate loans before the bank was hastily sold in 2011 while teetering on collapse. In the fourth quarter of 2009, for example, bank officials reported only $10.8 million in commercial loans as 90 days or more past due, concealing more than $316 million in past-due loans subject to an internal “waiver” practice.

Two other former Wilmington Trust officials were sentenced last week. Brian Bailey received 30 months in prison for conspiracy to conceal Wilmington Trust’s financial condition and conspiracy to commit bank bribery by receiving gifts for procuring loans. Peter Hayes was sentenced to 15 months in prison for soliciting and accepting a $70,000 loan from a home builder that sold Hayes and a business partner two model homes, rented them back from Hayes, then loaned him money to pay off the mortgage balance when they were sold for less than what he paid.

James Ladio, a former CEO of MidCoast Community Bank who schemed with Bailey to make improper loans to each other, was earlier sentenced to two years in prison and ordered to pay $700,000 restitution. Salvatore Leone, Zimmerman’s business partner, previously pleaded guilty to conspiracy to commit bank fraud and was sentenced to a year and a day in prison and ordered to pay $784,000.

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