On what would have been the sixth day of their trial on federal charges for conspiring to lie to the government-sponsored financial institution, two former Federal Home Loan Bank-Dallas executives reversed course and pleaded guilty to the charges.
Terence Carlyle Smith, former FHLB – Dallas President, and Nancy B. Parker, former Chief Information Officer, both pleaded guilty to conspiracy to make false statements to a Federal Home Loan Bank. U.S. Attorney for the Northern District of Texas Erin Nealy Cox said Smith, 62, entered his plea Friday morning, and Parker, 66, made her plea Tuesday morning.
“These defendants attempted to trick a Federal Home Loan Bank into footing the bill for their exorbitant personal travel,” Nealy Cox said. “We believe they were right to plead guilty, even at this late date, and are confident justice will be served at sentencing.”
The original indictment accused Smith, Parker, and a third executive, former CFO Michael Sims, of lying about traveling to professional conferences, including the 2008 through 2013 Consumer Electronics Show in Las Vegas. The three also claimed they traveled to Las Vegas multiple times; Amelia Island, Florida; Santa Barbara, California; and other locations in California and Florida.
The indictment gave a timeline of as early as January 2008 and continuing through November 2013. The reimbursement requests for travel were not actually business-related, and the bank paid about $780,000 to the three.
“The defendants incurred these expenses in connection with first class airfare, limousine services, concerts, vineyard tours, luxury hotel rooms, lavish meals, and expensive liquor and wine during more than 30 trips they took to Las Vegas, Nevada, Amelia Island, Florida, Coronado, California, San Diego, California, and other locations,” the U.S. Attorney’s office said, adding that the three also requested payment for unused vacation time to the tune of more than $450,000.
The original indictment also assessed three separate embezzlement charges to Parker for allegedly conspiring to embezzle from the bank in a scheme to have the bank pay for Christmas gifts for Smith.
“The actions of these defendants placed at risk the public’s trust in the Federal Home Loan Bank of Dallas. The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) is committed to investigating allegations of fraud committed against the Government Sponsored Enterprises, including the 11 Federal Home Loan Banks,” said Catherine Huber, Special Agent in Charge of the FHFA-OIG’s Central Region Office. “We are proud to have partnered with the U.S. Attorney’s Office for the Northern District of Texas in this case.”
Smith and Parker admitted to submitting the bogus expense reports to the FHLB in their plea documents, as well as falsely reporting their unused vacation hours.
Sims pleaded guilty to misprision of a felony (essentially failing to report what he knew to be a felony) prior to the trial, on June 27.
Smith and Parker each face up to five years in federal prison and will be required to pay restitution. Both agreed to repay the bank for the attorneys’ fees the bank and its insurance carrier incurred. All told, Smith will pay $4.2 million and Parker will pay more than $227,900. Smith faces three years in prison and will also be required to pay restitution.
It is unknown how or if Smith’s guilty plea will impact an agreement he reached with the Federal Housing Finance Agency in 2016, which required him to make restitution, agree to never work for an FHLB institution again, nor the Federal Home Loan Mortgage Corporation, or the Federal National Mortgage Association. The same agreement apparently leaves his vested balances in the bank’s retirement plan, his retiree health benefits, or the terms of a separation agreement with the bank signed on Sept. 27, 2013.