Ladue developer admits bank fraud | Law and order

ST. LOUIS • A developer from Ladue pleaded guilty to a federal charge of misapplying bank funds Tuesday and admitted helping defraud a bank to pay off millions of dollars in delinquent real estate loans.

Michael Litz, 63, admitted “aiding and abetting” co-defendant Shaun R. Hayes in misusing funds of former Sedalia-based Excel Bank by concealing loans from the bank and regulators, according to his plea, with the intent to defraud Excel.

“The two men worked together to enrich themselves at the expense of Excel Bank,” said Special Agent in Charge Richard Quinn of the FBI St. Louis Division. “This type of self-dealing and fraud violates the integrity of our banking system and undermines consumer confidence.”

Litz’s plea closely follows the guilty pleas of Hayes and Timothy Murphy, a former loan officer and executive vice president of Excel Bank, which made the loans

Hayes pleaded guilty Jan. 3 to bank fraud and misapplication of bank funds and could face more than 12 to 15 years in prison under federal sentencing recommendations.

Murphy pleaded guilty last week to bank fraud and could face roughly three years in prison. Under Litz’s plea, he could face 30 to 37 months in prison.

The men’s plea agreements say Litz’s company, Eighteen Investments, owed nearly $2.7 million to Excel Bank, nearly $3.7 million to Centrue Bank and $12.9 million to National City Bank. The company was once one of the largest buyers of foreclosed homes in the St. Louis area.

Litz and Hayes also owned a company, McKnight Man I LLC, that was delinquent on a $906,000 Centrue loan. That company was trying to develop property at Manchester and McKnight roads in Rock Hill.

READ ---  Working with Cosby? Tiffany Haddish says she was joking

Hayes was the controlling owner of a holding company that owned Excel and a paid consultant to the bank, and “exercised substantial control” over loans both on his own and via Murphy, the plea agreements say.

The Litz loans were part of a pattern of increased lending of substandard loans that did not follow normal underwriting safeguards, Hayes’ plea says.

Hayes agreed on behalf of Excel to buy the Eighteen Investments loan from Centrue at a discounted $2.4 million and the joint loan for face value, Hayes’ plea says. Murphy signed off on the off-the-books deal, which used a straw buyer and concealed the loan’s benefit to Hayes and Litz, the pleas say.

The straw buyer was told he would not have to pay off the loan. Hayes concealed that from the bank, and later hid the straw buyer’s threat to sue.

Hayes and Litz also arranged for a series of loans totaling $726,000 to try and rescue Eighteen Investment properties through a shell company and a Litz business associate who was not creditworthy, the plea says.

Hayes also had Excel buy the National City loan for $8.8 million, again with Murphy’s sign-off in another off-the-books deal, the pleas say.

At the end of Tuesday’s plea hearing, U.S. District Judge Audrey Fleissig questioned Litz closely about whether he did everything Assistant U.S. Attorney Jim Crowe claimed. Litz said he did.

Then she asked, “Did you know what you were doing?” “Yes,” he responded.

Banking regulators closed Excel in October 2012 after its financial condition had become “critically deficient.” It had suffered “substantial losses” associated with Eighteen Investments, the pleas say.

READ ---  Local RT Triples PFS in Metastatic NSCLC

Hayes was once lauded for growing the assets of Allegiant Bancorp to more than $2 billion before its sale to National City Bank in 2004.

But three banks subsequently associated with him failed, costing the Federal Deposit Insurance Corp. an estimated $193.2 million. Hayes was banned from the industry. Other Hayes businesses also failed.

By 2014, Hayes was arrested outside the St. Louis Bread Co. at Plaza Frontenac for failure to pay child support.