Anatomy of a Banking Scandal

The Keystone Bank Failure-Harbinger of the 2008 Financial Crisis

Robert Pasley

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351531788
• Topic: Business
• Subtopic: Sociology
• Index: Business

In the early 1990s, the First National Bank of Keystone in West Virginia began buying and securitizing subprime mortgages from all over the country, and quickly grew from a tiny bank with just $100 million in assets to over $1.1 billion. For three years, it was listed as the most profitable large community bank in the country. It was all a fraud. All of the securitization deals the bank entered into lost money. To hide that fact, bank insiders started cooking the books, and concealing that they were also embezzling millions of dollars from the bank. This was all hidden from the bank's attorneys and auditors, federal bank examiners, and even the board of directors of the bank. To keep the examiners at bay, the bank insiders did everything possible to avoid giving them access to documents they were entitled to see, documents they knew would sink their scheme. The head of the bank even went so far as to bury four large truckloads of documents in a ditch on her ranch.

Robert S. Pasley explores the failure of the First National Bank of Keystone, the intrigue involved, and the lessons that could have been learned and still can be learned about how banks operate, how federal banking regulators supervise financial institutions, how agencies interact with one another, and how such failures can be avoided in the future.

Table of contents

• Cover Page
• Half title
• Title Page
• Copyright Page
• Dedication
• Preface
• Author’s Note
• Acknowledgments
• Cast of Characters
• Entities Involved
• List of Acronyms
• 1 Burying the Documents
• 2 J. Knox McConnell and the Rise of the Bank
• 3 Billie Cherry, Terry Church, and the Town of Keystone, West Virginia
• 4 Death of Knox McConnell
• 5 A Train Wreck A Comin’
• 6 The Examinations of the Bank, 1990-1997
• 7 1998 Examination
• 8 The Last Year of the Bank
• 9 The Criminal Cases
• 10 The Civil and Administrative Cases
• 11 The Case Against the Attorneys
• 12 The Case Against the Bank’s Accounting Firm—Grant Thornton
• 13 The Sad Story of Gary Ellis
• 14 Aftermath of the Failure of the Bank
• 15 Harbinger of the 2008 Financial Crisis
• 16 Lessons Learned
• 17 Consolidation of the Federal Banking Agencies
• 18 Conclusion
• Appendix A: Additional Information Concerning the Criminal and SEC Cases Brought Against the Insiders of the Bank
• Appendix B: Additional Information Concerning the Civil Cases Brought in Connection with the Bank
• Bibliography
• Index