The law finally caught up with “bank robber” Troy A. Gregory. He received 60 months in prison, three years of supervised release, and he has to pay about $4.7 million in restitution.
“Why did I rob banks? Because I enjoyed it. I loved it.” – Willie Sutton
Unlike famed bank robber Willie Sutton, Gregory was a bank executive. He didn’t have to break-in, he was already sitting at his desk. He helped carry out a fraud to extract $15 million from 26 banks in the State of Kansas.
The Fraud
Gregory made millions in bank loans to a group of borrowers who were struggling to make payments on the loans. They had no way of repaying the money. So, in 2007, he loaned the same group about $15 million to build an apartment complex. His rationale was that they could sell the units, recoup their losses and repay the original loan.
How did Gregory convince the other banks to join in with fraud? He falsified the creditworthiness of the borrowers, the debt and falsified information on $1.7 in certificates of deposit purported to be collateral. The CDs were fictionalized along with all of the other details.
According to the Department of Justice (Kansas City):
“Gregory immediately diverted over $1 million of the loan to pay for part of the certificates of deposit pledged as collateral, pay off debt on the apartment property and make payments on unrelated loans.”
As the DOJ pointed out, the other 26 banks would not have participated in the scam had they known of the false representations. It would eventually cost those banks millions of dollars.
Insider’s Ponzi Scheme
In a sense, Troy A. Gregory created his own Ponzi scheme, and surely, he must have realized his borrowers could not have “bailed enough water” to keep his scam afloat. He was already in the hole $1.7 million before a single apartment unit could have been theoretically built.
From the beginning, the relationship Gregory established with the “desperate borrowers” seemed a bit suspicious. What was the bond created between Gregory and these borrowers? Who approved the early, fraudulent loans to these people? The questions demand to know who in the bank was responsible for oversite? Not only is it suspicious that this relationship was established, it is more suspicious that no one questioned the loans or the loan procedure. At the end of the day, an opportunity was created.
What was Troy Gregory’s need to do this? The report from the DOJ does not mention that the borrowers were family members or close friends. I must conclude it was greed. I would assume the desperate borrowers were in the building trade and in the course of random conversation one of them posed a question about the potential for huge profits if only they had the money.
Troy Gregory, “sitting next to a safe,” but have thought that as a banker he was never going to get anywhere; that it was time he made it big. In his mind, the measly $1.7 million he needed to fake the CD’s and in turn, create a syndication of several banks (victims at that), would catapult his life to great heights.
How could he rationalize this decision? Frankly, I don’t think he put too much thought into it. It was an “end-means” idealization. To his mind, he might have rationalized that he could outsmart them all, including his bank, 25 other banks, auditors, his management, bank regulators and lawyers. He will have five years to understand the consequences of his assumptions.
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