FDIC cites international companies in new Keystone bank complaint

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Posted 7:30PM on Saturday, August 31, 2002

CHARLESTON, WEST VIGINIA - The Federal Deposit Insurance Corp. has filed a new civil complaint in the collapse of the First National Bank of Keystone, tracing the alleged bank scam to people and companies scattered across the globe. The FDIC complaint names 33 defendants, including individuals, corporations and trusts located in Pennsylvania, Nevada, Georgia, California, Norway, Luxembourg and New Zealand, as well as islands in the Caribbean and South Pacific. Although no recovery amount is listed, the 102-page complaint alleges the defendants are responsible for $100 million in losses at the failed bank. The Office of the Comptroller cited ``apparent fraud'' when it closed the bank on Sept. 1, 1999, after being unable to account for $515 million of the bank's reported $1.1 billion in assets. The FDIC estimates losses at Keystone at between $750-$850 million, making it among the top ten bank failures in FDIC history. The agency is selling bank executives' assets to recoup its losses. Key parties named in the new complaint include Ronald Mitchell, of Pittsburgh, Pa., one of the first individuals connected to Keystone's loan securitization program and alleged to be a ``sham'' chief financial officer of Keystone Mortgage Company, FNB Keystone's wholly owned subsidiary. Other named defendants include Harald Bakkebo of Oslo, Norway, and his associate Pieter Oosthuizen of London, England; Felipa Chadwick of California, Bakkebo's girlfriend or wife; P. Todd Zeras of California and his girlfriend, Michele Bowling of Georgia; Brian Bakkebo, Harald Bakkebo's son; Robert Harris, whose address is unknown to the FDIC; David Aronoff of California; and various trusts and companies. The FDIC claims the Mitchell defendants, along with Keystone's ``corrupt management'' including J. Knox McConnell, Terry L. Church, Billie J. Cherry and Michael H. Graham, used ``bribery and extortion of employees, customers and co-conspirators to maintain their loyalty and silence.'' Church, 49, and several other employees embezzled more than $35 million from the bank before it collapsed. Church was sentenced to prison terms totaling 27 years and will pay $50 a month to pay off her $812 million restitution order from U.S. District Judge David A. Faber. The new FDIC complaint traces the millions Bakkebo and others were allegedly draining from Keystone to various offshore accounts, palatial personal residences, a Norwegian film-making enterprise called New Century and huge volumes of forgiven loans. The complaint alleges that Church paid off Bakkebo and later bought Mitchell's silence to keep them from telling bank regulators the true financial condition of the loan securitization program. With the addition of the new complaint, there are now eight active federal civil suits related to the Keystone bank collapse.