Deliberations begin in bank fraud trial
Tim Parkes and Mark Mourier faced 13 counts of bank fraud, with Parkes facing an additional charge of giving false information to investigators when he claimed the “shell” companies used in the alleged fraud were legitimate companies.
Deliberations began Tuesday morning after the week-long bank fraud case of the Remington duo whose actions, along with former Benton Bank president Jimmy Goddard, allegedly brought about the end of Benton Banking Company in 2007. Goddard, who pleaded guilty in March, was expected to be the government’s star witness but was not called to testify.
Tim Parkes and Mark Mourier faced 13 counts of bank fraud, with Parkes facing an additional charge of giving false information to investigators when he claimed the “shell” companies used in the alleged fraud were legitimate companies. Assistant US Attorney Gary Humble told jurors that Parkes and Mourier, through their company Remington Industries, accumulated loans they could not repay and used bogus LLCs (Limited Liability Companies) to deceive bank regulators about how much money had been lent to them. The defense claimed that the LLCs were legitimate companies and blamed Goddard for the alleged fraud.
Assistant US Attorney Gary Humble called only three witnesses: Jennifer Speights, Joe Waters and FBI Special Agent Scott Barker. Waters, manager of the Benton branch of what is now First Volunteer Bank, remained on the stand for two days.
According to his testimony, Waters signed two letters of credit for Remington Industries, one for $1.75 million in December of 2001 and one for $500,000 in February of 2002, “because the boss told me to.” The letters of credit provided backing for loans for Remington from The Livingston Group. Waters indicated he believed part of the need for the $500,000 was because Frontier Bank was threatening to call in a note Remington had there and that would cause Livingston to call in their note.
Waters said he had no reason to question Goddard when told to sign the letters of credit. He said there were lending limits in place at the bank but Goddard was in charge of the lending issues.
Waters said Remington already had a $1.6 million line of credit at the bank and the bank was backing a million dollar USDA loan. He said Remington was also having major cash flow issues, carrying as much as a negative $1.18 million in their checking account and incurring more than 200 overdraft fees per month between Sept., 2001 and February, 2003. He said the bulk of the money being loaned to Remington from The Livingston Group was to be paid to Benton Bank to cover the negative balance in Remington’s checking account and pay down their other loans.
In October, 2002, The Livingston Group called in the notes guaranteed by the letters of credit. Waters said he did not know Livingston had come to the bank demanding payment or that Goddard had given them a cashier’s check. He said once Goddard left the bank in 2007, there was a tangled web of transactions and it took them a while to figure out where all the money went.
Waters said the day after Goddard wrote the $2.25 million check to Livingston, Parkes and Mourier each signed personal notes for $1.125 million, and that no security or collateral was found for either of the notes. He said an email found in Goddard’s office titled “C-corp names” listed the names of 10 LLCs and had handwritten notations from Goddard as to the amount loaned to each company. They added up to the $2.25 million paid to Livingston and covered the $1.125 million notes to Parkes and Mourier.
Waters said there were no paper files for loans to the 10 LLCs, but they were able to find the microfilm copies of the loans. He said one of the LLCs, Automotive Coordinates, had a checking account and that $18,000 per month in interest was being paid on the 10 loans from that account.
The Automotive Coordinates account showed two deposits, one for $185,000 in February, 2003, and one for $192,000 in March, 2003, when the loans were initially set up. Waters said another 11 LLCs were eventually set up, totaling about $4 million owed to the bank. He said the bank was eventually forced by the FDIC to write-off the loans as bad loans.
Special Agent Scott Barker provided a timeline. He said an email sent to attorney Kent Moore, who helped Parkes set up the LLCs, was dated December, 2002, two months after the loans were made. He said Remington was overdrafted $1.18 million according to their January, 2003 bank statement. He said debit tickets in the bank showed a deposit amount equal to the money loaned to the LLCs, and the money went into the Automotive Coordinates account.
Barker said another email, dated September, 2004, was sent from Goddard to Parkes regarding deposits and drafts from an account for Harris Components, which had established its own $190,000 line of credit. The email said, in part, “you might want to consider a personal loan since the company is out of business.” Barker said a line of credit had been signed for Harris Components by Mourier earlier in 2004.
An email from Goddard in November, 2005, told Parkes that the bank was scheduled for an exam sometime after the beginning of the year and asked for an update on the status of a refinance through AmSouth bank.
Barker also testified Parkes told him all 21 of the LLCs were working, viable companies. Barker said Mourier told him they were “shell” companies set up to hide loans.
Testifying for the defense, Greg Swyers, who worked off and on for Remington for 18 years, said they started off as CanMark Industries (a name used on one of the LLC loans) in Toronto and began operations in Delano in 1985. He said they obtained their first mortgage from Benton Bank and that things were initially going well, but a change to a different type of manufacturing process for the floor mats, an EVA line, caused the company a lot of problems. He said the line could never be worked out and was eventually abandoned. He said the line was a black hole and felt the company needed to expand operations with China instead and that outsourcing began in 2004-05.
Swyers said Automotive Coordinates was set up to develop a line of seat organizers, blankets, CD cases and key fobs and they sold to K-Mart. He said the LLC named OEM was created to supply carpeted floor mats to Ford to be sold through dealerships. He said he had seen company letterhead from Harris Components. Swyers said he did not know anything about the LLCs named White Oak, CBM Sales, Davis, Polar, Inc., T & T or OMS.
Lisa Moses, Market Manager for Remington, said the business was hurt significantly by problems with the EVA line, such as mats melting to vehicles and complaints to retailers like Wal-Mart and Pep Boys. She said signing a business agreement with an overseas company named TaTa changed the way Remington did business.
Moses said Harris Components was operated out of the Remington office with Remington employees but that it had its own suppliers, products and business cards. She did not know if they filed a separate tax return because she was not involved with the finances.
Willard Rice testified he was brought into the company to help develop relationships with Asia. He said Remington needed to have multiple LLCs so they were able to deal with multiple suppliers and so that if one product line failed, it would not affect the others.
Rice said the first 10 LLCs all had plans: CDN sales was trying to develop a line of laminate flooring, CanMark was going to be for electric polishers, T&T was for 2nd quality flooring, White Oak was for impact wrenches and Motorworks was for jacks. He said the idea was to take any successful product lines and make them into their own company, but none of them were successful. He said he did not have any knowledge of loans for Harris Components, but that Harris was successful until their supplier failed.
Rice said he did not know if any of the LLCs filed a tax return. He said the employees were the same as those for Remington, but the LLCs were properly formed with proper ID numbers. Rice also said Mourier was replaced as CFO by Tim Davis at either the end of ’02 or beginning of ’03 and that it was a requirement for financing from Frontier Bank that Mourier be replaced.
Rice said he had not heard of any of the 11 companies in the second set of loans.
Thomas Parkes, Tim Parkes’ brother, testified he worked on T&T for over a year, trying to develop a market for flooring seconds. He said it was a full-time job for him but he did not receive any compensation and it was ultimately unsuccessful.
Kent Moore said the LLCs served as holding companies, and they held debt. He said the term “shell” could mean a company that has nothing or surrounded something or could mean a holding company. He said one of the LLCs managed an income stream for all the others.
Moore said he had properly established all 21 LLCs according to state law. He said Parkes initially discussed forming C-Corporations, but they decided LLCs would be best for tax purposes. Moore said the LLCs were set up without the clause that released Parkes from any liability and that Parkes always took responsibility for the loans.
Documents were later brought into evidence that showed Moore had filed amendments after 2004 that invoked Parkes’ protection, eliminating his financial liability for the LLCs.
Mike Richardson, attorney for Mourier, did not call any additional witnesses.
Humble called SA Barker back to the stand as his only rebuttal witness. Barker said a subpoena had been given to Moore for documents relating to the LLCs, and that the FBI was given documents relating to their formation but not the documents removing Parkes’ liability. He said he received those documents on Thursday.
Humble began his closing statements by pointing out that Parkes’ defense had spent the entire week saying Parkes had always taken responsibility for the loans, but “Lo and behold on New Year’s Eve, 2004, he’s off the hook.” He said there was no dispute as to who got the benefit from the loans and that the victim was the bank itself. He said fraud was only limited by man’s imagination to do it.
Humble said Remington was not creditworthy and that made the loans illegal. He said the loans were created before the LLCs and asked, “Does that sound legitimate?” He said Parkes and Mourier may not have understood what the FDIC regulations were, but they knew loans could not be made to Remington. Humble said the debt held in the LLCs allowed Remington to show $4.25 in equity on their books and they were the only ones benefiting from it. He said Mourier’s lawyer had done a good job of laying low throughout the trial but reminded jurors that the two were best friends and had moved here together.
Parkes’ attorney, David Garvin, said there was fraud, but the person committing the fraud never stepped foot in the courtroom. He said Goddard had a habit of breaking bad loans into pieces and that Parkes was “the patsy of all pasties.”
Garvin said, “Parkes was not a crook, he was a hero.” He said Parkes was trying to save jobs and that he took responsibility for the debt. He said Remington was losing money because they were paying it all to Benton Bank. He said Bancshares was a holding company and it was proper business to operate without a phone or office.
Garvin said there was no evidence in the case that Parkes knew what Goddard was doing and that Goddard used the wrong federal ID numbers on the loans. He said Remington needed the entities to remove debt off the books and that every penny Remington owed Benton Bank was paid back.
Garvin said he was reminded of a story about a little boy trying to throw starfish back into the water when a hurricane was coming in. He said a man told the boy it was useless to throw the starfish back in because waves from the storm were just bringing the starfish back onto the beach and they would die anyway. Garvin said the boy, with tears in his eyes, held up a starfish and said, “This matters,” and threw in back into the water. He told the jury Parkes was the starfish, and Goddard was the hurricane.
Richardson said neither of the men knew anything about lending limits and the bank was better off because of Remington. He said when Mourier was asked about “shell” companies, it was a generic question and anyone would have answered that it was wrong to create shell companies. He said Mourier always told the truth and acted in good faith and that there was more than reasonable doubt.
“You will be haunted if you convict Mr. Mourier,” he told jurors.
Humble closed the case by saying that in his 29 years on the job he had seldom seen the underhanded things he’d seen in this case. He asked how Goddard could have come up with the company names if Parkes had not given them to him. He said the two were in communication, adding, “How many of ya’ll get an email from your banker when he’s getting an exam?”
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