Former top First NBC Bank official said he defrauded bank with Ashton Ryan

William Burnell, the former chief credit officer at First NBC Bank, took the witness stand in federal court on Thursday and detailed how he allegedly conspired with former bank chief Ashton Ryan to defraud the bank by funneling millions of dollars to a handful of Ryan’s associates over several years.

Burnell, who had been the bank’s top internal credit watchdog from its founding in 2006 until it collapsed just over a decade later, testified at Ryan’s federal bank fraud trial that he had fraudulently signed off on millions of dollars of loans to a handful of the bank’s biggest borrowers throughout that period.

Asked by U.S. Assistant Attorney Matthew Payne who had committed the fraud with him, Burnell said, “I did it with Mr. Ryan, with Mr. Calloway, Mr. Beebe and other officers of the bank.”

Ryan, 75, faces charges of conspiracy to defraud, bank fraud and falsifying bank documents in an indictment that included his co-defendant in the trial, Fred Beebe, 62, a former vice president at the bank. Both men, who face up to 30 years in prison, have denied the charges.

Burnell is one of three former top First NBC officers to have taken guilty pleas in the case. In September, he admitted to conspiracy to commit bank fraud, acknowledging that he falsified bank documents in the years before the bank’s $1 billion collapse.

Alleged co-conspirators

After prosecutors laid out their case in broad strokes earlier in the week, Burnell was the first of several key prosecution witnesses who were expected to testify about how the alleged scheme worked.

Burnell testified Thursday about several borrowers who had racked up millions of dollars of dubious loans, including Frank J. Adolph, a Kenner-based businessman who is one of six borrowers in the case to have pleaded guilty.

Adolph, who had a debt collecting business and was starting a scooter operation in Metairie, had racked up $6 million in bad loans by the time the bank collapsed in April 2017.

Burnell told jurors that he and other bank officials had been suspicious that Adolph was using loan proceeds to fund his lifestyle rather than his business, and that he was submitting fraudulent information about his debt collection business.

Emails to Burnell from top loan officer Louis Balero said Adolph’s income was nowhere near enough to fund a lifestyle that was costing $40,000 to $50,000 a month, and included funding parties for his daughter when she was Queen of Thoth in 2014.

‘I’m not interested in input’

Balero said that he had checked on some of the account receivables Adolph’s company was using as collateral and found that many of the companies hadn’t done business with Adolph.

“Based on our audit, I do suspect fraud,” Balero wrote in 2014.

The email evidence shown to jurors included Ryan’s reply.

“Credit review does not give me directions and has no authority to act without my permission,” Ryan responded. “I’m not interested in input from credit review,” the department Balero ran.

Burnell testified for the prosecution for about two hours Thursday afternoon and covered similar ground for several of the First NBC borrowers who have pleaded guilty in the case.

They included Warren Treme, a developer who owed the bank $6 million by the end and was a business partner with Ryan in two land development ventures. Also, Jeffrey Dunlap, a contractor for those developments who had debts of $22 million with First NBC when it failed.

Burnell testified that he helped to cover up the fact that Ryan was funneling money to both Treme and Dunlap, in order to conceal that loans to Dunlap were in fact payments for work that an insolvent Treme could not meet.

Ryan’s defense has acknowledged that he made large and risky loans to a core group of borrowers, but his attorneys have argued that they were to try and help get businesses off the ground in the wake of Hurricane Katrina when it was difficult for everyone to raise money.

Tell it to the board

Much of Wednesday and Thursday were taken up with testimony from William D. Aaron, Jr., a prominent New Orleans lawyer who had been a board member at the bank.

“I went through a nightmare,” Aaron said Thursday, testifying about what he alleged were persistent efforts by Ryan and others to deceive board members about the true state of the bad loans that eventually resulted in the bank’s collapse.

Aaron had invested $300,000 of his own money in the bank when it started and put in more than $80,000 more in early 2017 in a last-ditch effort to save it, he said.

The prosecution played recordings of meetings of the First NBC board loan committee, which had ultimate responsibility over its lending. Aaron was one of the seven members of that committee, which was chaired by John Calhoun, a real estate broker.

Calhoun had expressed growing concern at the monthly loan meetings in the bank’s final couple years at the mounting losses of borrowers like Mississippi developer Gary Gibbs, who ended up owing the bank $123 million, as well as Gregory St. Angelo and Kenneth Charity, all of whom have pleaded guilty.

Ryan is heard in the recordings vigorously defending the borrower’s ability to pay and the quality of the collateral.

Not a doctor, nor a sister

Charity, for example, was supposed to be developing a shopping center and gas stations on Robert E. Lee Boulevard (now Allen Toussaint Boulevard), and Ryan assured the board committee that he was backed by his sister, a medical doctor, who had assets of more than $6 million.

“She was neither a doctor nor his sister,” Aaron said the board later discovered.

Ryan’s and Beebe’s defense attorneys countered that Aaron and his fellow board members had always been given full information about the risky loans.

They went through years of the bank’s audit and regulatory reports showing that risky loans had been identified and were there to see.

They also focused on the responsibility of Aaron and other directors to have acted on any concerns they had in order to rein Ryan in and deal with the mounting bad loans.

Aaron said they trusted Ryan and the other bankers to give them the right information but, he alleged, they lied to him and other board members.

“We came to the table acting in good faith,” he said. “We wanted to see the bank do well and we were not going to do anything to hurt it. We believed them.”