CommunityOne Bancorp fka COB

[Enterprising Investor]

Ponzi Case Against CommunityOne in N.C. Dismissed (9/30/13)

CommunityOne Bancorp (COB) in Charlotte, N.C., has been freed from the threat of prosecution for allegedly ignoring a $40 million Ponzi scheme run by a customer.

A U.S. District Court in North Carolina dismissed a case alleging that CommunityOne's banking unit permitted the scheme to be operated through accounts at the bank, CommunityOne announced Monday. A deferred-prosecution agreement that CommunityOne entered with the U.S attorney was also terminated.

The $2 billion-asset CommunityOne entered the deferred-prosecution agreement in October 2011 as part of a recapitalization deal. The company agreed to overhaul its anti-money laundering and Bank Secrecy Act programs as part of the agreement. Prosecutors said CommunityOne failed to file suspicious-activity reports on the customer's transactions.

CommunityOne also paid $400,000 in restitution to victims of the alleged Ponzi scheme, the Department of Justice said in 2011. The operator of the alleged Ponzi scheme, Keith Franklin Simmons, deposited more than $35 million in his investors' funds an account held at CommunityOne over more than two years, prosecutors claimed. In 2010, a jury convicted Simmons of securities fraud, wire fraud and money laundering.

The private-equity firms Carlyle Group and Oak Hill Capital partners led CommunityOne's $310 million recapitalization in 2011, allowing it to purchase the struggling bank of Granite. The deferred-prosecution agreement was a condition of the two banks' merger.

CommunityOne said last month that it would turn a profit in the third-quarter, after losing $276 million since 2010. The company changed its name from FNB this past summer.

http://www.americanbanker.com/issues/178_189/ponzi-case-against-communityone-in-n-c-dismissed-1062486-1.html