motion of united states to place case in abeyance and ... · austin v . united states, 509 u. s....

MOTION OF UNITED STATES TO

PLACE CASE IN ABEYANCE AND EXCLUDE TIME

EXHIBIT 1

Case 2:15-cr-00129 Document 2-1 Filed 06/15/15 of 27 PageID #: 7

May 20 , 2015

Gerard R . Stowers , Esquire Bowles Rice 600 Quarrier Street Charleston , WV 25301

U.S. Department of Justice

United States Attorney Southern District of West Virginia

Robert C. Byrd Umted States Courthouse 300 Virginia Street, East

Mailing Address Pns1 Office Rnx 1713

Charleston. WV 25326 304-3-15-2200

FAX: 304-347-5/04

Suite 4000 Charleston. WV 25301 1-800-659-8726

Re : United States v . Bank of Mingo

Dear Mr . Stowers:

This will confirm our conversations with regard to your client , Bank of Mingo. As a result of these conversations, it is agreed by and between the United States and Bank of Mingo as follows :

1. CHARGING AGREEMENT. Bank of Mingo agrees to waive whatever right it may have to be charged by indictment and will consent to the filing of a one - count information (the "Informationu) in the United States District Court for the Southern District of West Virginia , a copy of which is attached hereto as "Deferred Prosecution Agreement ( DPA) Exhibit A. u The Information will charge Bank of Mingo with failing to maintain an effective anti-money laundering program, in violation of Title 31 , United States Code , Sections 5318(h) (1) and 5322 (b) .

2. ACCEPTANCE OF RESPONSIBILITY. Bank of Mingo accepts and acknowledges responsib i lity for its conduct and that of its officers , agents , and employees, as set forth in the Stipulation of Facts , a copy of which is attached hereto as "DPA Exhibit B.u If the United States proceeds with the prosecution that is deferred by this Agreement against Bank of Mingo , Bank of Mingo agrees that it will neither contest the admissibil ity of the Stipulation of Facts or any other documents provided by Bank of Mingo to the United States , nor con tra dict in any such proceeding , including any guilty plea or senten cing hearing , the facts contained within the Stipulation of

Bank tftcer.-, Tni. ti als


Gerard R. Stowers , Esquire May 20, 2015 Re: Bank of Mingo Page 2

Facts . Accordingly, Bank of Mingo knowingly and volur.tarily waives any right it has pursuant to Fed . R. Evid. ~10 that would prohibit use of the Stipulation of F3cts.

3. DEFERRAL OF PROSECUTION . The United States agrees to reco~end to the Court that prosecution of Bank of Mingo on the charges set forth in the Information be deferred for a period beginning on the date on w~ich the Information is filed and enciing twelve (12) months from that date . The United States agrees to file a motion wit!: the Court pursuant to 18 U.S . C. § 3161 (h) (2) , promptly a~ter execution of this Agreement, in which the United States will request a continuance of all further criminal proceedings, including trial , until twelve months from the date of the filing of the Information , and for speedy trial exclusion of all time covered by such a continuance.

Bank of Mingo agrees to waive and does hereby expressly waive any and all rights to a speedy trial pursuant to the Sixth Amendment of the United States Constitution, 18 U.S.C. § 316l(h) (2) , Federal Rule of Criminal Procedure 43(b), and any applicable Local Rules of the United States District Court for t he Southern District of West Virginia, for the period that this Agreement is in effect .

Should the Court decline to accept a waiver of speedy trial pursuant to 18 U. S.C . § 3161 (h) (2) , both the United States and Bank of Mingo are released from any obligation imposed upo~ them by this Agreement and this Agreement shall be null and void, and the United s~ates sha ll promptly refund the $2.2 million paid to the United Scates purs~ant to =his Agreement.

4. RELEVANT CONSIDERATIONS . The United States enters into this Agreement based on the individual facts and circumstances presented by this case. Among the factors considered were the following :

(a) Bank of Mingo's willingness to acknowledge and accept responsibility for its conduct, as charged in the Information ( DPA Exhibit A) and as further detailed in the Stipulation of Facts (DPA Exhibit B);

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Re: Bank of Mingo

(b) Bank of Mingo ' s remedial actions taken to date, including: ( i) replacing the employee/officer who was responsible for BSA/anti-mo~ey laundering compliance and the appointment of a new BSA officer ; (ii) developing and continuing to implement a written plan for compliance with the BSA and internal controls to ensure such compliance ; (i ii ) completing a review of accounts for BSA compliance ; and, (iv) establishi~g a training program regarding BSA compliance and anti -money laundering ;

(c) Bank of Mingo ' s cooperation to date with the United States in the investigation of the criminal conduc~ described in the Stipulation of ?acts , and Bank of Mingo's agreement to continue to cooperate wj_ th the United States as outlined below in section S; and

(d) Bank of Mingo 's willingness to settle the criminal and civil claims that the Ur.ited States could bring against Bank of Mingo and to resolve those claims against Bank of Mingo with the Department of Justice.

5. COOPERATION . Bank of Mingo agrees to cooperate fully with the United States in any and all crimi~al investigations , sub j ect to applicable law and regulation and the attorney-clien~ privilege and attorney work-product doctrine. Bank of Mingo further agrees that in accordance with applicable l aws, it shall provide to the United States, upon request, any relevant document , e:ectronic data, or other items related to the conduct described in the Stipulation of Facts that are in Bank of Mingo's possession, custody and/or control . Whenever such data is in electronic format, Bank of Mingo shall provide access to such data and assistance in operating computers and other equipment as necessary to retrieve the data. This obligation shall not include production of materials covered by the attorney-client privilege or the work product doctrine or any other applicable privilege . Bank of Eingo shall completely, fully and t imely comply with all the record- keeping and report.:.ng requirements

Bank & cer' ' Tnit i a l s


Gerard R. Stowers , Esquire May 20 , 2015 Page 4

Re : Bank of M~ngo

imposed upon it by the Bank Secrecy Act and the rules pro~ulgated thereunder .

6 . FORFEITURE .

(a) As a result of Bank of Mingo 's conduct , including the conduct set forth in the Statement of Facts , tte parties understand ~he United States could i nstitute a civil judicial and/or administrative forfeiture action against certain funds held by Bank of Mi~go and that such funds would be fo rfe itable pursuant to 31 U.S . C . § 5317, because they were involved in violations of 31 U. S.C. § 5324 or a conspiracy to commit such violations . Bank of Mingo hereby acknowledges that at least $2 . 2 million was involved in transactions in violation of 31 U. S.C . § 5324. Bank of Mingo hereby agrees to forfeit to the Cnited States the sum of $2 . 2 ~ill ion (the "Forfeiture Amount") . Bank of Mingo hereby agrees that , in the event the funds used to pay the Forfeiture Amount are not directly traceable to the transactions, the monies used to pay the Forfeiture Amount shall be considered substitute res for the purpose of forfeiture to the United States pursuant -:o 31 U.S . C . § 5317 , and Bank of Mingo releases any and all cla i ms it may have to such funds . Bank of Mingo shall pay the Forfeiture Amount plus any associated transfer fees wi c.hin five (5) business days of the date on which this Agreement is signed by all parties , pursuan~ to payment instructions provided by the United S~ates in its sole di s cret i on . Bank of Mingo agrees to sign any additional documents necessary to complete forfei~ure of the funds .

(b) The Forfeiture Amount paid is final and shall not be refunded should the United States later determine that Bank of Mingo has breached this Agreement and commences a prosecution against Bank of Mingo. In the event of a breach of this Agreement and subsequer.t prosecution , the Uni ted States is not limited to the Forfeiture Amount . The United States agrees that in the event of a subsequent breach and prosecution , it will recommend to the Court that the amounts paid pursuant to ~~is Agreement be offset against whatever forfeiture the Court shall i pose

Ban


Gerard R . Stowers , Esquire May 20 , 2015 Re : Bank of Mingo Page 5

as part of its judgment. Bank of Mingo understands that suer. a recommendatio~ will not be binding on the Court .

(c) Until further notice, the payment instructions are as follows : The United States directs Banko= Mingo to present a cashier ' s check in the amount of $2 , 200,000 (two million two hundred thousand dollars and zero cents) made payable to the following:

United States Marshals Service c/o Federal Bureau of Investigation Attn : Dean Lauffer Jerry Dove Building 113 Virginia St r eet East Charleston , WV 25381

(d) Bank of Mingo consents to the e n try of judgment, if necessary, in that amount in a civil judicial case or an administrative forfeiture action .

(e) Bank of Mingo shall waive any defenses to this criminal action , or to any related administrative or judicial forfeiture action , based in whole or in part on the Excessive Fines Clause of the Eighth Amendment to the Constitution, or the holding or principles set forth in Alexander v . United States , 509 U. S . 544 (1993); United States v . Ba jakajian , 524 U.S. 321 (1998) ; Austin v . United States , 509 U. S. 602 (1993) , and their progeny .

7. CONDITIONAL RELEASE FROM LIABILITY. In return for the full and truthful cooperation of Bank of Mingo and its compliance with the other terms and conoitions of this Agreement, the United States agrees , subject to sect i ons 8 - 10 below, not to bring any crimir.al or civil case based on the conduct described in the Stipulation of Facts aga i nst Bank of Mingo or any of its corporate parents , s ubsidiaries , affiliates , predecessors , successors or assigns , in any criminal or civil case , except (a) in a prosecution for perjury or obstruction of justice ; (b) in a prosecution for making a false statement ; (c) in a prosecution or other proceeding relating any

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Gerard R. Stowers, Esquire May 20 , 2015 Page 6

Re : Bank of Mingo

crime of violence ; or (d) in a prosecution or other proceeding relating to a violation of any provision of Title 26 of the United States Code .

This Agreement does not p ~ovide protec~ion against prosecution for conduct not disclosed by Bank of Mingo to the United States Attorney ' s Office for the Southern District of West Virginia prior to the date on which this Agreement was signed , nor does it provide protection against prosecutio~ for any future involvement by Bank o: Mingo in criminal activity , including , but not limited to , any future involvement in money laundering or any future failure to maintain an effective anti-~oney laundering program .

This Agreement does not provide any protection against prosecution of any present or former officer, director , employee , shareholder, agent, consu l tant , contractor , or subcontractor of Bank of Mingo for any violatio~s corrmitted by them .

8 . CONDITIONS FOR DISMISSAL. If the United States believes that Bank of Mingo is in compliance in all material aspects with all of its obligat i ons under this Agreement, including its moneta ry obligations set forth above , and the requirements for remedial action as set forth in a Consent Order agreed to by Ban~ of Mingo and the Federal Deposit Insurance Corporation ("FDIC n ) , No . FD I C- 13-0349b, dated November 1 , 2013 (the " Consent Order n ) , withi::1 t.hirty (30) days of the expiration of the deferral period set forth above in section 3 , the United States shall seek dismissal with prejudice of the Information, and this Agreement shall expire and be of no further force or effect .

In the event the United States determines , in its sole discretion, that Bank of Mingo has satisfactorily remediated the criminal activity that is the subject of this deferred prosecution, anci as more fully described in the Stipulation of Facts , and further , that Bank of Mingo ha s in all materiul aspects satisfied its obligations under this Agreement and the Consent Orde~ , then the United States may termina'::e this Agreement early, prior to the expiration of the twelve-month period of deferral, by J :ing

Ban k i c er ' s I nitia l s


Gera~d R . Stowers , Esquire May 20 , 2015 Page 7

Re : Ba~k of Mingo

di s missal with prejudice of the Information. Any determina~ion by the Ur.ited States regarding Bank of Mingo ' s compliance or non- comp liance with the Consent Order shall have no effect on , or in any way bind , the FDIC.

9. BREACH OF AGREEMENT. If , during the term of this Agreement , the United States determines that Bank of Mingo has committed any c r ime u nder federa l law after the execution o: this Agreement , provided false or misleading information p"Jrsuant to thi s Agreement , or otherwise breached this Agreement , Bank of Mingo shall therea ft er be subject to prosecution , prior to the expiration of the deferral period , for any federal criminal violation of which the United States has knowledge , including the crimes charged in the Information . Further , i~ the event of a breach of this Agreement by Bank of Mingo , resulting in the prosecution of Bank of Mingo or a prosecution related to Bank of Mingo's failure to maintain an effective anti - money laundering program, the United States may use any information provided by or on behalf of Bank of Mingo to the United States or any inves tigative agency, whether pr ior to or subsequent to this Agreement , and/or leads derived from such information , including the attached Stipulation of Facts. Determination of whether Bank of Mingo has breached tb.e Agreement and whether to pursue prosecutior. of Bank of Mingo sha ll be in the sole discretion of the :Jni ted States .

10. WAIVER OF STATUTES OF LIMITATION. Bank of Mingo agree s that any violations of the Bank Secrecy Act , and the rules promulgated thereunder , that were not time - barred by the applicable s~atute of limitations as of the date of the execution of this Agreement may , in the sole discretion of the United States , be charged against Bank of Mingo within twe lve (12) months of any breach of this Agreenent , notwithstanding the expiration of any appl i cable statute of limitations.

11. WAIVER OF FOIA AND PRIVACY RIGHT. Bank of Mingo knowingly and voluntarily waives all rights , whether asserted directly or by a representative , to request or receive from any department or agency of the United States any records pertaining to the i nvestigation or prosecution of this case, including without any limitation any

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Gerard R . Stowers, Esquire May 20 , 2015 Page 8

Re: Bank of Mingo

records that may be sought under the Freedom of I nformation Act (FOIA) , 5 U.S.C. § 552, or the Privacy Act of 1974, 5 U. S . C . § 552a, :allowing final disposit i on.

12 . SALE OR MERGER OF BANK OF MINGO . Except as otherwise agreed to by the parties, Bank of Mingo agrees that, in the even:: it sells, merges, or transfers all or substantially all of its business operations as they exist as of the date of t he execution of this Agreement (whether by sale of stack, merger, transfer, consolidation, sale of its assets or o ti1er form of business combination) , then , in such an event, this Agreement shall be binding upon Bank of Mingo's successors and/or assigns.

13 . PUBLIC STATEMENTS . Bank of Mingo agrees t hat it shall not , through its attorneys, Board of Directors, agents, officers, or employees , make any public s~atement contradicting any statement of fact contained i n the Stipulation of Facts . Any such contradictory public statement by Bank of Mingo, its successor i n interest, its attorneys , Board of Directors, agents, officers or employees shall constitute a breach of this Agreement, and Bank of Mingo would thereafter be subject to prosecution pursuant to the terms of tb.is Agreement.

Upon notification f~om the United States to Bank of Mingo of a public statement by any such person that in whole or in parL contradicts a statement of fact conta i ned in the Stipulation of Facts , Bank of Mingo may avoid breach of this Agreement by publicly repudiating such statement within two business days after notification by t h e United States .

This section is not intended to apply t o any statement made by any ind~vidual in the course of any c riminal, reg~l a t ory, or civi~ case initiated by a governmental or private party against such individual . In addition , consis ;:ent with Bank of Mi ngo's obligation not to contrad i ct any fa c t c ontai ned in the Stipulation of Facts, Bank of Mingo may take good fa i th positions in l itigation involving any person or entity not a party to this Agreement. Nothing stated in this Agreement is intended to operate or shall operate a~iver

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Gerard R. Stowers, Esquire May 20, 2015 Page 9

Re: Bank of Mingo

of Bank of Mingo's rights under Federal Rule of Evidence 408.

14. PUBLIC FILING . The United States and Bank of Mingo agree that, upon approval by the Court of a deferral of prosecution, as contemplated by this Agreement, the Agreement and an Order deferring prosecution shall be publicly f i led in the United States District Court for the Southern District of West Virgi nia.

15. ENTIRETY OF AGREEMENT. This written Agreement constitutes the entire agreement between the United States Attorney's Office and Bank of Mingo in this matter. There are no agreements, understandings or recommendations as to any other pendi ng or future charges agai nst Bank of Mingo in any Court other than t h e United S t ates Distr i ct Court for the Southern District of Wes t Virginia.

16. CORPORATE RESOLUTION. Attached hereto as "Deferred Prosecution Agreement Exhi bit C" is a resol u t i on of the Board of Directors of Bank of Mingo, authorizing the execution of this Agreement and the Stipulation of Facts, for and o n behalf of Bank of Mingo.

Acknowledged and agreed to on behalf of t he United States:

By :

PHW / fgc

R. BOOTH GOODW I N I I United States Attorney

,;;~ ) '!-( UJ~ / PHILI P H. W~IGHT 1 Assistant United States At t


Gerard R. Stowers , Esquire May 20 , 2015 Page 10

Re : Bank of Mingo

As a co~porate officer of Bank of Mingo , authorized to act for and on behalf of Bank of Mingo in executing and entering into this agreement , I hereby acknowledge by my initials at the bot tom of each of the foregoing pages and by my signature on the last page o: this ten-page agreement that I have read and carefully discussed every part of it with Bank of Mingo's attorney , that I understand the terms of this agreement , and that I voluntarily agree to those terms and conditions set forth in the agreement on behalf of Bank of Mingo . I further acknowledge that Bank of Mingo ' s attorney has advised Bank of Mingo anc me of Bank of Mingo ' s rights , possible defenses , the Sente nc i ng Guideline p r ovisions , and the consequences of entering into this agreement , that no promises or inducements have been made to Bank of Mingo other than those in this agreement , and that no one ha s threatened Bank of Mingo or forced Bank of Mingo in any way to e nter into this agreement . Finally , Bank of Mingo and I are satisfied with the representation of Bank of Mingo ' s attorney in this ma tter .

BY : (Print Name)

Co porate Off~·~~ Bank of Mingo Defendant

G ARD R . STOWERS Coun se l for Defendant

,.,.---~r-~~~~I_J ______ _ Date Signed

Date Signed


UNITED STATES DISTRICT COURT FOR THE SOUTHERN DI STRICT OF WEST VIRGINIA

CHARLESTON

UNITED STATES OF AMERICA

v . CRIMINAL NO. 31 u. s . c . § 53 1 8(h) ( 1) 3 1 u . s .c. § 5322(b )

BANK OF MINGO

I N F 0 R M A T I 0 N

The United States Attorney Charges:

(Failure to Establ i sh an Effec tive Anti-Money Laundering Program)

At all relevant times:

Background

1. Defendant BANK OF MINGO was a domestic financial

institution, as defined by 31 U.S.C . § 5312, with offices in and

around Mingo County, West Virginia, which engaged in, and the

activities of which affected, interstate commerce.

2 . Among other locations, defendant BANK OF MINGO

operated a branch office at or near 70 West Fourth Avenue,

Williamson, West Virginia ("Williamson Branch").

3. From at least January 2009 through and until at least

April 2012, the Williamson Branch was managed and supervised by

a defendant BANK OF MINGO employee known to the United States

Attorney ("Williamson Branch Manager").

DEFEFFED PROSECUTION AGREEMENT EXHIBIT A


The Bank Secrecy Act

4. The Bank Secrecy Act ("BSA"), 31 U. S.C. § 5311 et

seq. , and its implementing regulations, which Congress enacted

to address an increase in criminal money laundering activities

utilizing financial institutions, required domestic banks,

insured banks and other financial institutions to maintain

programs designed to detect and report suspicious activity that

might be indicative of money laundering and other financial

crimes, and to maintain certain records and file reports related

thereto that are especially useful in criminal, tax or

regulatory investigations or proceedings.

5. Pursuant to 31 U.S.C. § 5318(h) (1) and 12 C.F.R. §

326.8, defendant BANK OF MINGO was required to establish and

maintain an anti-money laundering ("AML") compliance program

that, at a minimum:

(a) provided internal policies, procedures, and controls designed to guard against money laundering;

(b) provided for an individual or individuals coordinate and monitor day-to-day compliance with BSA and AML requirements;

to the

(c) provided for an ongoing employee training program; and

(d) provided for independent testing for compliance conducted by bank personnel or an outside party.

DEFERRED PROSECUTION AGREEMENT EXHIBIT A 2


6. From in or around January 2009, and continuing until

in or around April 2012, the exact dates being unknown to the

United States Attorney, in Mingo County, in the Southern

District of West Virginia, and elsewhere, defendant BANK OF

MINGO will fully violated the Bank Secrecy Act, 31 U.S. C. § §

5318 (h) and 5322, and regulations issued thereunder, including

12 C.F.R. § 326.8, by failing to develop, implement and maintain

an effective anti-money laundering program. Specifically,

defendant BANK OF MINGO knowingly and willfully failed to

implement and maintain effective policies, procedures and

internal controls that would have resulted in the BANK OF MINGO

(1) obtaining sufficient know-your-customer information; (2)

preventing its customers from structuring cash transactions to

avoid the currency transaction reporting requirements; and ( 3)

filing suspicious activity reports on suspicious activity.

In violation of Title 31, United States Code, Sections

53 18 (h) ( 1 ) and 53 2 2 (b) .

By:


R. BOOTH GOODWIN II United States Attorney

PHILIP H. WRIGHT Assistant United States Attorney

DEFERRED PROSECUTION AGREEMENT EXHIBIT A 3


UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF WEST VIRGINIA

CHARLESTON


v.

BANK OF MINGO

STIPULATION OF FACTS

The United States and Bank of Mingo stipulate and agree that the facts comprising the offense set out in the Information include the following:

Background

At all relevant times, Bank of Mingo was chartered under the laws of West Virginia and insured by the Federal Deposit Insurance Corporation ("FDIC") . Bank of Mingo's headquarters were located at or near 10 Commerce Drive, in or near Williamson, Mingo County, West Virginia, and Bank of Mingo had six locations, including a banking branch located at or near 70 West Fourth Avenue, Williamson, West Virginia ("Williamson branch") . From at least the early 2 OOOs through approximately late 2013 or early 2014, the Williamson Branch was managed and supervised by a person identified as the "Williamson Branch Manager." At various times, that individual also served as Executive Secretary to the Bank of Mingo's Board of Directors.

As a domestic financial institution insured by the FDIC, Bank of Mingo was subject to the requirements of the Bank Secrecy Act ("BSA"), codified in Title 31 of the United States Code, and the regulations prescribed under it by the Secretary for the Department of the Treasury.

Del-ant' ' Initia l s

PLEA AGREEMENT EXHIBIT B


The BSA/AML Program

Pursuant to the BSA, Bank of Mingo was required to maintain and administer an Anti-Money Laundering Program, commonly referred to as a BSA/AML Program. The BSA/AML Program was intended to provide guidance to the Bank, its officers, Directors and employees, of its institutional obligations under the BSA to ensure compliance with those policies. Bank of Mingo employees were required to receive annual training to ensure compliance with its obligations under the BSA.

The "Know Your Customer" or Customer Identification Program

An integral part to every BSA/AML Program included a component that requires bank employees to gather certain information regarding new customers or accounts and the general understanding for the intended purpose for those accounts. In that regard, the Bank of Mingo BSA/AML Program provided, in relevant part, as follows:

As part of Bank of Mingo's overall compliance with the Bank Secrecy Act (BSA; see separate BSA po~icy), it is the policy of Bank of Mingo to have a clear and concise understanding of all bank customer practices in order to avoid criminal exposure to the Bank by any "customer" who would use the Bank's resources for illicit purposes. The objective of this policy is to insure the immediate detection and identification of suspicious activity at the institution.

Cur r ency Tr a nsacti on Report Filing Requirement

As part of the statutory obligations imposed by the BSA and regulations prescribed under it by the Secretary for the Department of Treasury, Bank of Mingo was required to file a Currency Transaction Report ("CTR") for every currency transaction conducted with the bank that involves more than $10,000. The Bank of Mingo BSA/AML Program stated the following in the 2000 Update:

Violations of the subject the bank,

bank's reporting requirements may its employees, and the customers

~nt ' ' Ini ti a l s


2


..

involved to both civil and criminal liability. Punishment may include both fines and imprisonment. These procedures are designed to assure compliance with the bank's reporting responsibilities . Under no circumstances shall ~loyees discuss these procedures with customers or provide customers with any advice as to how reporting requirements can be avoided. If a customer should have any questions, the employee should give the customer the "Facts You Should Know" customer information pamphlet which will answer any questions the customer may have about the bank's currency transaction responsibilities while at the same time avoiding statements which could be construed as assisting the customer in structuring transactions in violation of regulations. Employee violations of these procedures shall be treated as serious offenses of bank security.

Further, the Board of Directors for Bank of Mingo issued the following Policy Statement on December 17, 2008, reinforcing its commitment to comply with the BSA's CTR filing requirements:

It is the policy of the bank to comply fully with the reporting and record-keeping requirements of the Bank Secrecy Act (12 CF.R Part 21) as it pertains to currency transactions in excess of $10,000.00 Dollars .

All officers and other employees of the Bank are made aware of the potential personal liability which accrues to them for willful violation or other failure to comply with the provisions of the Bank Secrecy Act, as well as the penalties which could be assessed against the Bank. All personnel are instructed that technical violations, such as the filing of an erroneous or incomplete Currency Transaction Report, FINCEN Form 104, which triggers an admonishment or penalty from either the IRS or the Bank's federal supervisory agency shall result in administrative action.

The Management necessary for

shall develop procedures as are deemed the preparation, verification, con trol~

~ Ini t ials


3

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--·------ ------------------ -

submission and maintenance of Currency Transaction Reports in accordance with the requirements of the Bank Secrecy Act. The Compliance and Assistant Compliance Officers (or other person) shall have the responsibility for training all applicable personnel in the proper procedure for the preparation, verification, control and submission of Currency Transaction Reports.

To assist Bank of Mingo employees, including the Williamson Branch Manager, in understanding the CTR filing requirement, the Bank of Mingo BSA/AML Program provided examples of when a CTR needed to be filed. One of those examples stated as follows:

of the same or related customers who simultaneously and each conducts a

Representatives enter the bank large currency different tellers.

transaction under $10,000 with

Likewise, to ensure that CTRs were filed in that type of circumstance, the BSA/AML Program incorporated a specific rule requiring that transactions be aggregated based on withdrawals from and deposits made into a particul ar account:

At the end of each banking day, (based on turnover times which will begin no earlier than 2:00p.m.,) the Transaction Log Sheets for $3,000 or more for that banking day will be sent to the main bank. (Our banking day runs from 2:01 p.m. (the previous business day) to 2:00 p.m. the following day, with the exception of Friday banking which runs from 2:01 p.m. Friday thru 2:00 p.m. Monday.

The Log Sheets will then be sent to the Computer Programmer for a centralized review of the currency transaction reports prepared by each banking office. The purpose of this review is to identify multiple transfers for the same individual or account which should be aggregated for reporting purposed (sic) on a bank-wide basis. Where aggregated multiple transactions on the same business day meet the threshold amount for filing, a CTR will be prepared.

~dant'' Initials


4


Suspicious Activity Report Filing Requirement

As part of the statutory obligations imposed by the BSA and regulations prescribed under it, Bank of Mingo was required to file a Suspicious Activity Report ("SAR") whenever the bank detected a known or suspected violation of federal law. This rule applied to all violations of federal law. The Board of Directors ratified the following provisions to its BSA/AML Program related to the filing of SARs effective December 16, 2009:

TRANSACTIONS TO REPORT

There is no ceiling or floor for filing a SAR when insider abuse is suspected. Whenever the bank has a "substantial basis" for identifying an insider, including employees and agents, as having committed or aided in a criminal act, the bank should file a SAR

regardless of the dollar amount involved.

For transactions that may involve violations of the Bank Secrecy Act or its implementing regulations, the bank should file a SAR whenever the transaction involves $5000 or more. The amount should be calculated by aggregating actions or transactions of the suspect or group of suspects.

For other violations of law there are two reporting amounts:

1. $5000 or more when a suspect can be identified.

2. $25,000 when the bank identifies a pattern or vio~ation but does not have a substantia~ basis £or identifying a possib~e suspect or group o£ suspects.

Initia l s


5


The Structurinq Scheme

Beginning in at least the early 2000s, Jerome Edward Russell ("Russell") and Frelin R. Workman ("Workman") operated a series of employee-leasing companies that provided contract labor to coal mines and coal-mining related operations in southern West Virginia. Russell and Workman maintained business accounts at Bank of Mingo.

From at least 2005 through approximately April 2012, Russell and Workman, each in his own respect and through various employees or others, routinely withdrew cash from a line of credit established at Bank of Mingo to make payroll. The withdrawals consisted of separate transactions, in amounts less than $10,000, for the purpose of avoiding the Bank of Mingo's CTR filing requirement.

In June 2005, as required by the BSA/AML Program, the Williamson Branch Manager conducted a "Know Your Customer" investigation to ascertain Russell and Workman's intended purpose for this banking pattern. At that meeting, Russell and Workman provided the reason they orchestrated the cash withdrawals was because their mine service business had crews working in several different geographical areas. Each of the withdrawals was intended for a different crew and the fact that all of the amounts were less than $10,000 was coincidental. Further, Russell and Workman claimed that all of the cash payments were documented in a payment log and provided to their accountant at the end of the year so the appropriate tax forms could be prepared.

The Williamson Branch Manager accepted this explanation and conducted no further investigation to corroborate the statements made by Russell and Workman. Russell and Workman's conduct continued without interruption. 1

1 Russell and Workman were previously using a line of credit secured by a car lot Workman owned that was held in the name of his wife. The Williamson Branch Manager did require that Russell and Workman open a new line of credit in the name of their mine-service business, which was Tug Valley Mine Service at that time.

In i tials


6

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By November 2007, Russell and Workman formed Aracoma Contracting, LLC ( "Aracoma") as part of the employee leasing business. Russell and Workman placed Aracoma in the name of a nominee owner. The Bank of Mingo failed to obtain sufficient information to determine if Aracoma was placed in the name of a nominee or, more importantly, the reason for doing so.

Once Russell and Workman formed Aracoma, the Williamson Branch Manager approved a $50,000 line of credit ("LOC XX2383"), which was used by Russell and Workman for payroll.

Russell and Workman were to l d by the Williamson Branch Manager to prepare the LOC XX2383 "Request for Advance" for each of the anticipated cash withdrawals for that day identifying which Aracoma employee would make that particular withdrawal and the amount. Further, the Williamson Branch Manager instructed Russell and Workman to prepare a "Cash Denomination Sheet" to be submitted with each Request for Advance so the tellers could pre-count the cash.

An Aracoma employee would transmit, via facsimile to the Williamson Branch, the LOC XX2383 Requests for Advance and corresponding Cash Denomination Sheets. Either the Williamson Branch Manager or the assistant branch manager would approve the Requests for Advance. Then, a teller would prepare a cashier's check in the name of the identified Aracoma employee, along with the pre-counted cash.

Later, the Aracoma employees, sometimes together, would arrive at the Williamson Branch. The employees would then endorse the cashiers' checks and receive the pre-counted cash. Aracoma employees were not required to deposit the cashier's check into an Aracoma checking account and then make the withdrawal from that account.

In order to track branch banking cash activities, the Bank maintained at each branch a "Cash Log" for all cash transactions during the day over the amount of $3,000. The teller would enter in the Cash Log the name of the employee withdrawing the cash and the Bank of Mingo account on which the cashier's check

~nt' > Initial s


7


was drawn. By conducting the cash withdrawal transactions in this manner, there was nothing on the Cash Log to indicate more than $10,000 had been drawn from LOC XX2383 in the same banking day. The Cash Log was reviewed the following day by the BSA Officer to determine what, if any, CTRs should be filed.

As a matter of general practice, the BSA Officer reviewed the Cash Log and did not file a CTR because the cash log entries only referenced the individual Aracoma employee. As clearly stated in the Bank of Mingo BSA/AML Program, the BSA Officer should have aggregated the separate Aracoma banking activities under one account, but did not do so. As a result of this failure, Bank of Mingo did not file CTRs on the cash withdrawals.

The September 2008 Memo

Following an audit in September 2008 by the Federal Deposit Insurance Corporation ("FDICn) and the West Virginia Division of Banking (n/k/a West Virginia Division of Financia l Institutions), Bank of Mingo's two governing regulatory bodies, the BSA Officer issued the following memo to the Williamson Branch Manager dated September 10, 2008:

Under recent BSA review of Bank of Mingo's records and procedures an item came to light. When being reviewed a question came up about Aracoma Contracting. I informed them they were in the business of supplying mine labor to coal companies and they paid their employees with cash. Upon further review it was brought up that the transactions were being completed in such a way to keep from having a CTR filed with as many as 3 or 4 persons cashing cashier's checks drawn upon the line of credit they have established.

It has been recommended for the bank to keep a complete and documented transaction history and profile on their withdrawals we need to do the following. Pursuant to Reg [ 31 CFR 103.22 (d) (2) (i)(vii)], Aracoma contracting needs to have cashier's checks issued and then deposited into a checking.

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account owned by them at Bank of Mingo. They would then write checks on this account to get the cash out of Bank of Mingo for payroll purposes. This recommended procedure i s to have a complete audit trail and transaction history. Wi th the bank's cashiers check account being used it is much or would be much harder to recreate the necessary information in case of an audit. It was recommended for Bank of Mingo not to continue the way of allowing them to get monies for their payroll. If a CTR must be reported the CTR is being filed Bank of Mingo's Cashiers check account not an account owned and maintained by Aracoma Contracting.

Bank of Mingo acknowledges that it was than September 10, 2008, that the manner and Williamson Branch Manager allowed Aracoma withdrawals from LOC XX2383 was contrary policy and should have been modified.

Swnmary

on notice no later method in which the to structure cash

to the Bank's own

From January 2009 through April 2012, Bank of Mingo admits that it should have filed CTRs and SARs related to cash withdrawals from the LOC XX2383 involving at least $2.2 million. Bank of Mingo admits that its failure to file CTRs was not only in breach of its own BSA/AML Program, but also a violation of the Bank Secrecy Act and the regulations promulgated thereunder.

Bank of Mingo acknowledges that it is lega l ly responsible for the Williamson Branch Manager's willful failure to file CTRs related to Aracoma.

Finally, Bank of Mingo admits that had i t complied with its obligations under the Bank Secrecy Act, and t he regulations prescribed under it by the Secretary for the Department of Treasury, CTRs and SARs would have been filed on the Aracoma structuring activity.

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..

This Stipulation of Facts does not contain each and every fact known to Bank of Mingo and to the United States concerning Bank of Mingo's involvement and the involvement of others in the charges set forth in the Information, and is set forth for the limited purpose of establishing a factual basis for the defendant's guilty plea.

Stipulated and agreed to:

By: ?:A!MI z: Yr.t~tnli .. /J ( rint Name)

Co porate Bank of Mingo Defendant

GE RD R. STOWERS Counsel for Bank of Mingo

PHILIP H. !'WRIGHT 1 Assistant United Sta


10

~J!--pl.r: Date

.5?21.., 24/.J-Date

(. :2-2- )-t!JtS

Date

.&a.nt'' Initi a ls


....

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BANK OF MINGO

CERTIFICATE OF ADOPTION OF RESOLUTIONS

I, JoAnn Curry, do hereby certify that I acted as Secretary for the Regular

Meeting of the Board of Directors of the Bank of Mingo, Belo, West Virginia {the "Bank") held

on May 21, 2015, and that the following Resolutions were duly adopted by the Board of

Directors of the Bank during the Meeting and that these Resolutions have not been modified or

rescinded and are in full force and effect as of the date of this Certificate:

RESOL YEO, that Gerard R. Stowers, as outside litigation counsel to the Bank.

attended the Meeting and presented to the Board of Directors the Deferred Prosecution

Agreement with the United States Attorney's Office, Southern District of West Virginia (the

"Deferred Prosecution Agreement"), along with the Stipulation of Facts and the proposed

Infonnation, Exhibits A and B to the Deferred Prosecution Agreement; and,

FURTHER RESOLVED, that after review and discussion, and upon motion made

by Lewis Hall, Jr., seconded by John Richard White, the Board of Directors approved the

execution of the Deferred Prosecution Agreement and the attached Exhibits, by a vote of 5-0,

thereby consenting to the payment of the forfeiture amount equal to the sum of $2,200,000.00;

and,

FURTHER RESOL YEO, that after review and discussion, and upon motion made

by John Richard White, seconded by Thomas F. White, the Board of Directors approved, by a

vote of 5-0, the execution of the Deferred Prosecution Agreement documents by Randall

Brumfteld, in his capacity as Executive Vice-President of the Bank. and further authorized,

empowered and directed Mr. Brumfield to take all such further action, in the name and on behalf

DEFEFFED PROSECUTION AGREEMENT EXHIBIT C


ofU1e Bank. as may be deemed to be necessary. proper or advisable in order to fully carry out the

intent and accomplish the purposes of the foregoing resolutions. including the execution of the

Deferred Prosecution Agreement and all other documents related thereto.

n' .. • 1 WITNESS WHEREOF. 1 h3'e """"d th is Cenifi<ate oo this 1-lf.ay of

~.2015.

2

DE FEFFED PROSECUTION AGREEMENT EXHIBIT C


motion of united states to place case in abeyance and ... · austin v . united states, 509 u. s....

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