FORT MYERS — Jerry Williams knows how much time he will spend in prison for his crimes.
But the former boss of Orion Bank in Naples doesn't yet know how much he will spend to pay back his victims.
Whatever the amount, former bank employees who bought company stock won't get any of the restitution money.
On Tuesday, a federal judge sentenced Williams – Orion's former CEO, president and chairman – to six years in prison after he pleaded guilty for his involvement in a bank fraud conspiracy. Williams must pay restitution.
The largest amount he pays could go to the Federal Deposit Insurance Corp. The amount won't be decided until a hearing is held within three months. The FDIC took over the bank's fraudulent loans after selling most of Orion's assets to IberiaBank.
The FDIC has estimated its direct losses from the Orion scheme at more than $31 million. In the scheme, more than $80 million in loans were made to a borrower, Francesco Mileto, who was over his loan limit, with $15 million returned to the bank for the illegal purchase of stock.
"Restitution is not necessarily the same thing as loss," said Nicole Waid, the U.S. assistant attorney who prosecuted Williams.
One of Williams' attorneys, Thomas Buchanan, said the FDIC's losses attributed to Williams are "$2 million to zero," based in part on the fact that the fraudulent loans tied to the scheme have been repackaged and sold since Orion failed. He also argued $15 million went back to the bank as part of the conspiracy.
"It left the bank. It came back two hours later. It didn't disappear," Buchanan said.
The prosecution, however, argued the $15 million that came back to the bank for the purchase of stock wasn't used to help pay down the millions in illegal loans tied to the scheme, so it didn't reduce the FDIC's losses.
Meanwhile, former employees who once received notices from the U.S. Attorney's Office and other investigating agencies describing them as victims aren't entitled to restitution under federal law.
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When Orion failed, the FDIC, as the receiver, stepped into the shoes of the bank and the FDIC became the victim, Waid said.
That means the hundreds of other shareholders in Orion, including employees who purchased stock as part of a company retirement plan, won't get any money from Williams or his three co-conspirators, who are already in prison and paying restitution.
"It's very frustrating. The law says we are not victims. But we are victims," said Bill Bartels, Orion's former human resources director. He worked for the bank for 12 years and estimates he lost a nest egg once valued at more than $700,000.
"It still mystifies us where all that money has gone," he said.
At the sentencing hearing, Patrick Miller, a former senior vice president for Orion, described how he and other employees invested their life savings in the bank "at the constant demands and intimidation" of Williams.
"As an officer of the bank he repeatedly reminded us that we had an obligation to do so," he said. "Many of us felt our job would be in jeopardy if we did not. Over time he repeatedly misrepresented to us, with deceitful promises and lies, that our investment was safe and managed with the highest standards of honesty and integrity."
Former employees brought a federal class-action lawsuit against Orion Bancorp Inc., the bank's holding company, in hopes of recovering some of their lost money.
"We have some hope," Miller said. "We are cautiously optimistic."
A judge has yet to decide whether the case can move forward as a class-action.
According to the lawsuit, 96 percent of the retirement plan's assets – more than $33 million – were invested in Orion's stock.
While that legal battle continues for employees, Williams has agreed on the amounts he owes to four Orion shareholders who he sold stock to months before the bank failed in November 2009. The four shareholders who Williams has agreed to pay restitution to were tricked into buying stock as the bank faltered, according to Waid.
Williams has agreed to pay $5 million in restitution to Walter Krumm, a wealthy Naples borrower who invested $10 million in the bank's stock in June 2009 – five months before the bank failed.
Krumm was told the stock would be a "great investment," though the bank was faltering, and he's still paying off $9.5 million in loans he took out for the purchase of the stock because it's "right thing to do," according to court records. The stock was sold as part of the larger scheme to make it appear the bank had a fresh infusion of capital.
In June 2009, Williams also sold his personal stock to three friends and business associates for his own personal gain and he's agreed to pay them back.
"He made up stories about stock owners who developed cancer and other serious illnesses and were forced to sell their shares," Waid said in her sentencing memorandum to the judge. "Moreover, he lied about the true financial condition of Orion Bank. At the same time that Williams was selling his personal stock, he was falsifying Orion Bank records and lying to regulators about a capital raise."
Williams pocketed $765,600 from the three stock sales. He's agreed to pay back all of that money: $100,000 to David Jancisin, $332,800 to Peter Mortensen, and $332,800 to pro football coach Dave Wannstedt, one of Williams' closest friends at the time of the stock sale.
__ Connect with Laura Layden at www.naplesnews.com/staff/laura_layden