Risk & Compliance

Global Treasury Mismanagement

Former bank officer gets 97 months in federal prison for fraudulently obtaining more than 100 loans from KeyBank, totaling more than $40 million; a...
Stephen TaubApril 20, 2007

David F. Verhotz, once the senior vice president for global treasury management at KeyBank, will serve eight years in prison after pleading guilty to bank fraud, according to Gregory A. White, U.S. Attorney for the Northern District of Ohio.

U.S. District Judge John R. Adams sentenced Verhotz to 97 months in prison and five years of supervised release and ordered him to pay about $18.6 million in restitution to his former employer.

Verhotz, whose responsibilities included requesting, approving, and underwriting trade advance loans for international banking customers, was accused of fraudulently obtaining more than 100 loans from KeyBank, totaling more than $40 million, in the names of several foreign banks and an international trade company.

According to prosecutors, a hefty portion of the proceeds went for Verhotz’s personal use, including $5.6 million to purchase a home in New York’s Hamptons, about $2.7 million toward a condominium on Park Avenue, and more than $2 million for jewelry. Verhotz was also ordered to forfeit these assets.

Prosecutors maintained that Verhotz used some of the loan proceeds to repay existing loans, in order to conceal and continue the scheme. During 2006, however, he allegedly obtained 29 loans from KeyBank totaling about $18.6 million in the names of three foreign banks; those loans remain outstanding and are subject to restitution.

Verhotz, who is married, entangled himself in the fraud due to his romantic involvement with another woman, according to the Associated Press, which cited court documents. The woman did send a letter to Judge Adams asking for leniency, but with little effect: the 97 months in prison Verhotz has ahead of him is the maximum under sentencing guidelines, the AP added.

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