Published: Mon, 7 Dec 2015 11:22am GMT
A bank CEO has become one of the first business leaders to face jail-time for her actions during the financial crisis.
Poppi Metaxas is the former CEO of Gateway Bank in California. Last week she was sentenced to 18 months in jail following what she referred to as “a tragic mistake that has devastated my entire life”, Newsday.com reports.
Metaxas had previously pleaded guilty to conspiracy to commit bank fraud. In 2009, Gateway Bank was under pressure from federal regulators to rid itself of bad loans and raise capital. The CEO attempted to solve the issue by arranging a £3.6 million loan (£2.4 million) from a now-defunct mortgage lender. The mortgage lender transferred the money to investors who sent it back to Gateway, purportedly as a down payment to buy toxic loans from the bank, Newsday.com reports.
Metaxas was accused of misleading her Board as well as regulators by not informing them of the “round trip” which didn’t end up saving the bank’s finances after all.
Metaxas’ defence attorney pleaded with the judge for probation, arguing that the actions were caused by a desire to save the bank and not to put money in the former CEO’s own pockets. The defence made the plea on behalf of the 62-year old grandmother who is recovering from ovarian cancer and who is in chronic pain.
The prosecution on the other hand argued that Metaxas’ actions did harm the bank and that she should be sentenced to between two and four years in jail. The bank had £94 million in assets in September. That is a decrease from the £311.6 million assets the bank had in March 2009. The numbers are from the Federal Deposit Insurance Corporation.
The Federal Prosecutor argued that Metaxas had committed the crime in an attempt to “preserve her job, she did it to protect her reputation”.
The judge said that while a prison-sentence may be difficult for the former CEO due to her chronic pain, the judge believed “any sentence less than 18 months would just not reflect the seriousness of this crime.”
John Coffee is a Professor at Columbia Law School. Newsday.com quoted him, saying that no leader of major financial institutions has been sentenced for wrong-doing the financial crisis. However, a few leaders of smaller banks and mortgage brokerages have been incarcerated.