Former Bank President David Lavine Sentenced to Federal Prison for Bank Fraud of His Bank and Tax Evasion
Fraudulently Skimmed Almost Half a Million Dollars from Refinanced Loans
Baltimore, Maryland – U.S. District Judge Richard D. Bennett sentenced David Harris Lavine, 58, of Rockville, Maryland, today to three years in federal prison, followed by two years of supervised release, for bank fraud in connection with a scheme to defraud the financial institution, where he served as acting president and later president of a bank affiliate, and for income tax evasion. Lavine was also ordered to pay $892,541.75 in restitution to the financial institution and $365,228.80 in restitution to the Internal Revenue Service and to forfeit $503,378.87.
The sentence was announced by United States Attorney for the District of Maryland Robert K. Hur.
From March 2010 until January 2011, David Harris Lavine was the acting president of CFG Community Bank. According to his plea agreement, Lavine admitted that, while acting President, he diverted $100,000 of bank funds to his own benefit. Lavine directed bank employees to wire funds, which Lavine mischaracterized as payments to a mortgage broker on bank loan refinances, to a company that belonged to a friend of Lavine’s. Lavine lied to the friend about the source of the funds and had the friend pay the $100,000 over to Lavine.
In January 2011, shortly after Lavine resigned as the acting president of CFG Community Bank to become president of Capital Financial Ventures (CFV), an affiliate of the bank, Lavine devised a scheme to defraud CFG Community Bank, through the refinance of two bank-owned commercial mortgage loans and the diversion of the Bank’s loan payoffs to his personal benefit and the benefit of Charles Tobias, his co-defendant in this case.
Lavine admitted that in order to execute the scheme to divert loan payoffs, he used his position at CFV to pose as the CEO/President of CFG Community Bank. For example, Lavine invited the borrowers of two loans with balances totaling over $7.5 million, to refinance those loans with other financial institutions for lower mortgages and pay off CFG Community Bank. At Lavine’s direction, the settlement companies sent the mortgage loan payoffs not to CFG Community Bank but to an escrow account managed by Tobias so that Lavine could divert over $775,000. The records created by Lavine showed one payoff amount to the borrower, but the records Lavine sent to the bank understated the payoff amounts and concealed the fact that Lavine had diverted over $775,000 from the Bank’s loan payoffs. Lavine divided the fraud proceeds with Tobias.
Lavine also diverted a total of $91,126.56 in insurance premium refunds on one of the commercial loans purchased by the bank to his personal account instead of paying the funds over to the borrower. Lavine spent over $14,000 of the refunded premium; over $76,000 remained in the custody of the bank. The bank repaid the full $91,125.56 to the borrower.
Lavine and Tobias owned Capital T Partners Brookfield, LLC, a Maryland limited liability corporation. In the fall of 2011, Lavine and Tobias attempted to realize a profit from a group of non-performing mortgages their company had purchased by “donating” some of the mortgages to a charity as an in-kind donation and taking a charitable deduction on their income tax returns. Lavine admitted that he and Tobias created a false IRS Form 8283 and false appraisal which they had Ari Gerzowski, a real estate agent and not a licensed appraiser, sign. As a result of the fraudulent appraisal, Tobias and Lavine received a valuable tax deduction for Capital T Partners Brookfield which would pass through to their personal income tax returns. Lavine and Tobias divided the tax benefits from the $1,032,722 purported charitable deduction they were claiming.
Lavine also admitted that he failed to report income of more than $176,000 in 2010, and failed to report income of $480,289.44, from the loan fraud proceeds and two stolen insurance refunds in 2011. Lavine underpaid his taxes for 2010, 2011, and 2012 by $365,228.80 based on his failure to report fraud proceeds as income and his fraudulent charitable contribution deduction which sheltered reported income.
Charles L. Tobias, age 56, of Potomac, Maryland previously pleaded guilty to willfully subscribing to a false tax return, and was sentenced to two years of probation with 8 months of home confinement with electronic monitoring and ordered to pay restitution of $154,438 to the Internal Revenue Service. Ari Gerzowski, age 47, of Baltimore, pleaded guilty to aiding and abetting the willful submission of a materially false document to the Internal Revenue Service and was sentenced to probation.
David Harris Lavine Indicted for Allegedly Stealing From His Own Bank
BALTIMORE, MD – Who is watching out for you? It sure wasn’t the Board of Directors of CFG Bank, according to a federal indictment of the bank’s recent president – David Harris Lavine.
On September 26, 2017, a federal grand jury indicted Lavine, 58, of Rockville, Maryland, on charges of theft of bank funds by a bank officer and bank fraud and Lavine and Charles L. Tobias, 56, Potomac, Maryland for conspiracy to defraud the Internal Revenue Service and tax evasion.
The indictment was announced on Sept. 28, 2017, by Acting United States Attorney for the District of Maryland Stephen M. Schenning.
Prosecutors alleged that from March 2010 until January 2011, David Harris Lavine was the Acting President of CFG Community Bank. From January 2011 until August 2011, Lavine was president of the bank affiliate, Capital Financial Ventures LLC. According to the indictment, Lavine, while acting President, diverted $100,000 of bank funds to his own benefit. The indictment also charges that while president of the bank affiliate, Lavine devised a scheme to defraud CFG Community Bank, a state member bank supervised by the Federal Reserve Board, through the re-finance of bank-owned mortgage loans and the diversion of loan proceeds to his personal benefit and the benefit of a friend.
According to court documents, Lavine used his position at Capital Financial Ventures to pose as the CEO/President of CFG Community Bank. For example, Lavine invited the borrowers of two loans with balances totaling over $7.5 million, to refinance those loans with other financial institutions for a lower mortgage and pay off CFG Community Bank. At Lavine’s direction, the settlement company sent the mortgage loan payoff not to CFG Community Bank but to another company so that Lavine could divert in excess of $775,000. Lavine created a false correspondence with the loan borrowers to provide to CFG Community Bank to conceal the diversion from CFG Community Bank.
According to the indictment, Lavine and Tobias owned Capital T Partners Brookfield, LLC, a Maryland limited liability corporation. In the fall 2011, Lavine and Tobias decided to realize a profit from a group of non-performing mortgages by fraudulently “donating” some of the mortgages to a charity as an in-kind donation and thereby receiving a valuable tax deduction for Capital T Partners Brookfield which would pass through to their personal income tax returns. Lavine is also charged with tax evasion for two years for failing to report the monies he received through the bank offenses and using the fraudulent charitable contribution as a deduction. Tobias is charged with tax evasion for failing to report income and also using the fraudulent charitable deduction.
The maximum possible penalties for the bank offenses are thirty years in prison and/or a $1 million fine per count and 5 years in prison and /or $250,000 per count for the tax charges.
According to the website of CFG Community Bank, the following persons are members of the Board of Directors, and as such, are responsible for the activities of the bank and its officers:
Board of Directors (The dates of involvement in the bank by the officers and directors are sourced from the website of CFG)
JOHN (JACK) W. DWYER, CHAIRMAN OF THE BOARD
Jack Dwyer founded Capital Funding Group, Inc. in March 1993. Today he is the chairman, founding shareholder and senior underwriter of the large mortgage banking firm specializing in originating and servicing FHA-insured construction and permanent loans for nursing homes, hospitals, assisted living, board and care facilities and other income properties.
DEBORAH A. SPANGENBERG, VICE CHAIRMAN
Deborah Spangenberg is the president and chief operating officer of Capital Funding, LLC and has been with the Capital Funding Group of companies since it was founded in 1993, As president and chief operating officer of Capital Funding, LLC, Spangenberg currently oversees the entire FHA process. This includes underwriting loans and application packages of FHA-insured construction and permanent loans for nursing homes, hospitals and assisted living facilities and asset management of the FHA/HUD portfolio.
DANIEL S. BAIRD
Daniel Baird is the chief executive officer of Capital Funding Group Inc. Prior to joining Capital Funding Group in 2006, Baird held the position of Chief Financial Officer at E. Stewart Mitchell Inc. for eight years. Baird holds a BBA and an MBA from The Sellinger School of Business at Loyola University.
William Middleton joined the board of CFG Community Bank in June 2010. He brings more than 50 years of banking experience in the Mid-Atlantic area and a passion for helping to create a significant, locally based community bank to serve the banking needs of the Baltimore business community.
GEORGE D. RIEDEL
George D. Riedel joined the board of CFG Community Bank in June 2010. He is currently the vice president, head of intermediary distribution at T. Rowe Price Group. He has been with the global management investment organization since 1998. Riedel also serves as vice president on the board of Family and Children’s Services of Central Maryland, nonprofit serving individuals, and families at every stage of life.
BRUCE A. YARWOOD
Bruce Yarwood joined the Board of CFG Community Bank in July 2011 and brings more than 35 years of professional experience in the health policy and long-term care industry. He retired in January 2011 as president and CEO of the American Health Care Association (AHCA).
Planned acquisition was canned in 2014.
A press release from CFG made the following announcement:
October 31, 2014) – MVB Financial Corp., (OTC Markets Group OTCQB: MVBF), and Maryland-based CFG Community Bank (CFG) today jointly announced that they have terminated MVB’s proposed approximately $30 million asset acquisition by mutual agreement. Both parties have released each other from all obligations with no termination fee required by either entity.
In a joint statement, Larry F. Mazza, President and CEO for MVB Financial Corp., and Jack Dwyer, Chairman of the CFG family of companies, said: “This is an amicable decision. Due to the passage of a year’s time, modifications to the business plans for each company, and changes in the industry, it was determined that it is in the best interests of both companies, our employees and shareholders to move forward independently. We are committed to continuing to work together on special projects.”
CFG Community Bank announced that on July 14, 2014, that Mark A. Keidel has joined the bank as CEO. Keidel will assume responsibility for the day to day operations of the three-branch bank headquartered in Baltimore County, as well as assist with the efforts to complete its pending acquisition by MVB Bank, Inc. (a subsidiary of MVB Financial Corp., OTCQB: MVBF).
The sale of CFG Community Bank to MVB Bank was announced in October 2013. It will signify MVB’s entry into Maryland. Completion of the transaction is pending regulatory approvals and other customary closing conditions.
Keidel replaces Gary Rever, who resigned from the bank earlier this month.
“We wish Gary well and are pleased to have Mark on board to assist with the transition,” said
Jack Dwyer, Chairman of the Board. “He brings a wealth of experience to the process.”
Prior to joining CFG Community Bank, Keidel served as COO and CFO for First Mariner Bank from 2000 until his most recent appointment to Interim CEO in December 2011. He has over 30 years of banking experience. Prior to his tenure at First Mariner, Keidel was the CFO of both Carroll County Bank and Mason-Dixon Bancshares, Inc., which was acquired by BB&T Corporation in 1999.
According to a press release issued by CFG, the Baltimore Business Journal included CFG Community Bank in its 2013 list of “Largest corporate philanthropists in Greater Baltimore”.
The press release stated that “John W. “Jack” Dwyer, owner and chairman of the board, acquired CFG Community Bank in August 2009.”
CFG and its subsidiaries, Capital Funding and Capital Finance, ranked 19th on the “corporate givers” list with a total giving a value of $322,303. The bank was 24th on the “corporate philanthropists” list with $304,538 in total donations.