A 46-page federal court filing Friday outlines a vast money laundering scheme by the late Layton "Scooter" Stuart, former CEO and owner of One Bank and Trust.
The U.S. government is seeking to seize $17.6 million in cash otherwise payable to a Stuart family trust on a $20 million John Hancock policy purchased by the bank. It is also seeking five vehicles, including two Cadillacs, a Lexus and a Land Rover, that the filing alleges were purchased with improperly obtained bank money, as well as almost $160,000 in accounts at Bank of America and Onebanc and in a lawyer's trust account from proceeds of a home sale. The seizures are sought because the assets are described as fruits of criminal enterprise.
Stuart died March 26 at age 62 after being taken to a hospital for what was reported as respiratory distress. The federal filing suggests that he might have caused his own death to preserve insurance proceeds for his estate.
Stuart was the owner of OneFinancial Corp., the holding company for the bank. Bank directors were ordered to fire him after the Office of the Comptroller of the Currency ordered an audit of the bank in late September.
By Feb. 15, the bank had begun questioning the Hancock policy and gave Stuart 30 days to respond to questions about the arrangement or it would terminate payment of premiums. On March 15, the bank gave him another 30-day grace period, according to the filing. It continues:
On or about March 21, 2013, Layton Stuart went to a funeral home in Little Rock, Arkansas to arrange for funeral and prepay his funeral expenses.On March 26, 2013, Layton Stuart was transported to the hospital and pronounced dead at St. Vincent's Hospital in Little Rock, Arkansas
Then, said the filing:
Then, according to prior agreement, the bank reached an agreement with trustee for the Stuart Family Trust to be reimbursed for the more than $3 million in premiums that had been paid. That terminated the policy. On May 20, the trustee claimed the policy limit for the Stuart estate. On June 10, John Hancock received a request for death benefits. On June 17, John Hancock paid the benefits to the United States on the understanding and condition that Onebank will be paid out any money owing to the Bank under the split dollar life insurance policy.
In a concluding segment of the filing, the IRS agent said he believed that after Stuart was removed as bank CEO he used tainted proceeds to continue to make premium payments to avoid a default —"to wit, a default would keep his family from enjoying the death benefits of the Hancock policy." It continued:
In light of being placed on notice by the bank that the bank was seeking to terminate the Hancock Policy, your affiant believes that Layton Stuart was forced to take extreme steps in order to prevent Onebank from having yet another reason to terminate the Hancock policy."
The Arkansas Times obtained a copy of the seizure document filed Friday, along with the extensive affidavit of the IRS agent. It details a tangled web of money transfers. Highlights:
* He tapped $17.3 million in federal TARP money to divert $1.5 million to personal accounts and $1 million of that went to pay personal federal and state tax bills.
* He spent $1 million in bank money to renovate a family home in Pleasant Valley home.
* He bought an $850,000 Dallas condo associated with the Ritz Carlton with bank money.
* He converted $500,000 in restitution of bank overpayments to a marketing company to his own use.
* He used bank money to purchase a home for a family member.
* During his years at the bank, he spent $1.75 million in bank money on private charter air flights, including 282 private flights between June 2011 and April 2013 for Stuart, family and friends, with no evidence that other bank officers or bank customers were on any of the flights.
* The filing said $376,000 in bank money supposedly spent to improve the bank's luxury box at Verizon Arena actually went to pay Stuart's credit card and other personal bills.
* The document alleges a former bank employee was caught embezzling money, but worked out a deal after being fired to make restitution with another employee. Some $110,000 in the employee's repayments wound up in Stuart's bank account, not the bank's.
The document indicates anonymous tips — particularly related to mortgage fraud and bank expenditures on family members — drew investigators into their review of the bank's activities. The filing says documents were shredded at the bank despite an order from federal regulators to preserve records.
In summary, IRS agent John Shortway said he believed that Stuart converted more than $10 million from the bank and its holding company for personal use and the personal use of family members. He said there's evidence to show Stuart committed bank fraud and money laundering, with Stuart the beneficiary of embezzled TARP funds and fraudulently obtained loan proceeds between his bank accounts and third-party creditors. The tainted money was commingled with legitimate funds to make it harder to trace.
Stuart particularly relied on a special account once set up to own service stations, but in the end only a shell for laundering money, according to the filing.
All the vehicles named for seizure, including some bought for family members, were purchased with tainted money, the filing says. The agent also said evidence indicates the balance in an escrow account from sale of a family member's home is subject to seizure.
Interested parties will be given a chance to appear to contest seizure of the money and property identified.
The bank is under new management and the filing implicates no current employees of the bank in any improper activities. The bank was sound enough when the problems were discovered that it wasn't taken over by another institution, as has happened at some troubled institutions, though it was under federal supercision because of losses. Depositors have never been in danger of losing any money. Arkansas Business detailed some of the background, including his tax problems, when the investigation of Stuart became public after investigators swooped down on his Hickory Creek home. At the time, he suggested the feds were just being thorough and others at the bank could be under review.