TRAVERSE CITY — For more than two years Northwestern Bank's then-president and two other executives tried to hide in excess of $38 million in loan defaults by the bank's largest borrower from the bank's board of directors and government regulators, federal authorities allege.
The Federal Deposit Insurance Corporation made public late Friday civil charges it levied on Aug. 20 against Harry "Scrub" Calcutt, Northwestern's retired president, CEO, and board chairman. Also accused are the bank's former senior loan officer William Green and bank executive vice president Richard Jackson.
The agency accused the men of a pattern of dishonesty and unsound and unsafe banking practices that caused the bank to suffer financial losses.
The FDIC notice also accused Calcutt of improper financial gain based on an annual bonus equal to 4 percent of Northwestern's profits.
"In 2009 and 2010 Calcutt's bonus compensation was approximately $95,000 more than it should have been as a result of the bank's inflated net income figures," the documents state. "Calcutt, as a major shareholder of the bank's holding company, also benefited when the bank issued substantial dividends in 2010 and 2011 based on the board of directors' false perception regarding the bank's performance and overall financial condition."
The FDIC wants all three men banned from working for any federally regulated bank, and proposed fines against Calcutt of $125,000 and $100,000 each against Green and Jackson.
Calcutt declined to discuss details of the charges in a meeting with the Record-Eagle on Friday, but said he "did nothing wrong" and will fight the allegations.
The defaulted real estate loans are tied to a group of 19 separate limited liability companies collectively controlled by members of the Nielson family of Generations Management LLC and Generations Realty. The loans represented almost half of the bank's Tier One, or core capital investments.