Former Bank Vice President Pleads Guilty to Hiding Appraisals in Bank Audit

David S. Kennelly, of Vancouver, Washington, pleaded guilty in U.S. District Court to a Scheme to Conceal Material Facts in connection with an audit of the former Bank of Clark County in 2008. The bank was shut down by the FDIC in January 2009. Under the terms of his plea agreement, KENNELLY is prohibited from working for a financial institution regulated by the FDIC or the Federal Credit Union Act, without written approval of the agency. When sentenced on May 14, 2010, by U.S. District Judge Robert J. Bryan KENNELLY faces up to five years in prison, three years of supervised release, and a $250,000 fine.

During the examination in November 2008, KENNELLY falsely represented that all available appraisals were in the computerized system. Based on the appraisals the examiners were able to review, the bank was instructed to increase its loan loss reserved by more than $3 million. Just prior to the termination of the examination, investigators learned of the hidden appraisals on some 15 different projects. In response, KENNELLY first tried to advance the false claim that the appraisals had been overlooked because of a heavy work load. He unsuccessfully attempted to get a bank employee to promote this story. After the examiners saw the additional appraisals, they determined the bank needed an additional $16.7 million of capital for loan reserves. On January 16, 2009, the Washington State Department of Financial Institutions declared the Bank of Clark County insolvent and appointed the FDIC as Receiver.

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