by Ben Vernia | October 18th, 2015
On October 16, the Department of Justice announced that it had reached a settlement of False Claims Act allegations brought against an Arkansas financier, Layton Stuart, and his estate and trusts. According to DOJ’s press release:
The United States resolved for $4 million a False Claims Act action against the estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its subsidiary, One Bank & Trust N.A., both based in Little Rock, Arkansas. One Bank, another victim of Stuart’s frauds that is now under new management, will receive an additional $6.9 million.
The United States’ complaint, filed earlier this year, alleged that Stuart and One Financial violated the False Claims Act by making false statements about the financial condition of One Financial and One Bank to induce the Department of the Treasury to invest Troubled Asset Relief Program (TARP) funds in One Financial.
* * *
Congress created TARP in response to the financial crisis of 2008 to restore liquidity and stability to the financial systems of the United States. Under the Capital Purchase Program component of TARP, the Treasury invested capital in financial institutions in exchange for preferred stock or debt securities and other consideration.In the lawsuit, the United States alleged that in 2009, Stuart, on behalf of One Financial, applied for a TARP investment. According to the United States, Stuart knowingly made false statements about the financial condition of One Financial and One Bank and about the intended use of the TARP funds. In particular, Stuart allegedly concealed serial frauds that he and other One Financial directors and One Bank executives had been committing, and intended to continue committing, on One Bank. The schemes involved Stuart’s diversion of One Bank funds for personal use, including Stuart’s purchase of luxury vehicles for his wife and children. Within two weeks of receiving the TARP funds, Stuart allegedly diverted $2.185 million into his personal accounts. Stuart was terminated from One Bank in September 2012.
* * *
Stuart’s frauds were discovered through a federal investigation launched in 2013. The assets of Stuart’s estate and the trusts he had created were subject to a civil forfeiture action in the Eastern District of Arkansas. The civil forfeiture action was settled and dismissed contemporaneously with the False Claims Act settlement with the Stuart estate and trusts. Under these settlements, in addition to the $4 million recovered by the United States, $6.9 million will be received by One Bank and $4 million will be returned to the Stuart trusts.
