Financial Fraud: David R. Payne Charged With Multiple Counts of Bank Fraud

Financial Fraud
Fletcher, N.C. Attorney Indicted On Federal Charges For Bank Fraud And Making A False Statement To A Bank

Fletcher, N.C. Attorney Indicted On Federal Charges For Bank Fraud And Making A False Statement To A Bank

Defendant Allegedly Defrauded Three Banks of at Least $1.6 Million

CHARLOTTE, N.C. – A federal grand jury sitting in Asheville returned a criminal bill of indictment late yesterday against David R. Payne, 52, of Fletcher, N.C., charging him with multiple counts of bank fraud and making false statements to a bank, announced Jill Westmoreland Rose, U.S. Attorney forr the Western District of North Carolina.

John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and Jay N. Lerner, Inspector General of the Federal Deposit Insurance Corporation, Office of the Inspector General (FDIC-OIG) join U.S. Attorney Rose in making today’s announcement.

According to allegations contained in the eight-count indictment, on multiple occasions throughout 2009, Payne executed a scheme to defraud three Western North Carolina financial institutions: Pisgah Community Bank (PCB), Mountain First Bank & Trust (MFBT), and Bank of Asheville (BOA), (collectively, “the Banks”). The indictment alleges that Payne defrauded the Banks for at least $1,607,000, by making false statements and material misrepresentations about his financial condition on a series of loan applications he submitted to the Banks. Payne applied for the fraudulent loans in his personal capacity and through other corporate entities he controlled, including Provision 08, LLC, and Shire Properties, LLC.

According to allegations in the indictment, in February 2007, Payne executed two promissory notes to NC Four C’s, LLC (NC4Cs), a North Carolina limited liability company, in exchange for NC4Cs’s disbursement of two loans totaling $800,000. In 2009, Payne ceased making payments to NC4Cs, when he allegedly began to have serious financial problems. The indictment further alleges that in December 2008, Payne, through Provision 08, LLC, entered into a transfer agreement with a victim identified in the indictment as “J.E.” Payne had previously acted as an attorney for J.E. and for J.E’s charitable and business enterprises. The indictment alleges that, according to the terms of the transfer agreement, Payne agreed to pay to J.E. and J.E.’s heirs $4.38 million in exchange for the transfer of four properties to Payne (collectively “the Properties). The indictment also alleges that J.E. never received a single payment from Payne or Provision 08, LLC.

According to allegations in the indictment, upon acquiring the Properties from J.E., Payne began using the Properties to obtain bank loans from PCB, MFBT, and BOA, to benefit himself and his corporate entities. To secure the bank loans, Payne allegedly made numerous misrepresentations, false statements, and omissions, all with intent to defraud the Banks. For example, in December 2008, Payne used the acquisition of the Properties to secure a $735,000 bank loan from PCB. During the loan application process, Payne lied to a PCB loan officer who inquired about Payne’s acquisition of the Properties, telling the loan officer that J.E. had gifted Payne the Properties in recognition of previous services provided to J.E. The indictment also alleges that Payne failed to disclose to PCB his personal liabilities, including the $800,000 personal debt to NC4Cs.

The indictment goes on to allege that Payne continued to use the Properties as collateral in subsequent loan applications throughout 2009, and was able secure loans from two additional banks, MFBT and BOA, based on similar misrepresentations and omissions. In at least one of those instances, the indictment alleges that Payne’s own law firm served as the closing attorney for the loans, and that Payne was able to hide information from the bank regarding existing encumbrances on the property, which he used as collateral for the loan. As a result of Payne’s conduct, MFBT and BOA disbursed to Payne two loans in the amount of $250,000 and $522,000, respectively.

In making today’s announcement, U.S. Attorney Rose stated, “Payne allegedly went on a bank fraud spree, and, using his law license as a conduit to the fraud, he caused substantial financial harm to individuals and to financial institutions. I want to thank the FBI and the FDIC-OIG for leading this complex financial investigation that led to the federal charges,” said U.S. Attorney Rose.

Payne had his initial appearance today before U.S. Magistrate Judge Dennis Howell. The charges of bank fraud and making false statements on a loan and credit application each carry a maximum prison term of 30 years in prison and a $1,000,000 fine per count.

All the charges contained in the indictment are allegations. The defendant is innocent until proven guilty beyond reasonable doubt in a court of law.

The investigation was led by the FBI and FDIC-OIG. Assistant U.S. Attorneys Don Gast and Daniel Bradley of the U.S. Attorney’s Office in Asheville are in charge of the prosecution.

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