Opinion ID: 3026413
Heading Depth: 4
Heading Rank: 2

Heading: Evidence Concerning Holck and Umbrell

Text: The government showed that Holck and Umbrell, as executives of Commerce Bank, worked mightily to earn contracts and increase cash deposits from Philadelphia.9 At the same time that they were soliciting this business, Holck and Umbrell extended five different loans to Kemp. The government contrasted Commerce’s amenability to Kemp once he became treasurer to the fact that just before Kemp took that position, in September 2001, Commerce rejected Kemp’s application for a $2,000 line of credit with a form letter. It was the government’s position that Holck and Umbrell extended these loans to Kemp for the purpose of influencing his decision-making, while Holck and Umbrell claimed that the loans were made in the ordinary course of business. The government’s evidence concerning these loans may be summarized as follows: First, the government presented testimony demonstrating that Kemp introduced Paul Schnapp, a member of his family, to Umbrell, and requested a $10,000 loan for Schnapp. Schnapp had filed for bankruptcy two years earlier, and his application for a similar loan had recently been rejected by Wachovia. Commerce required Schnapp’s wife, Teresita, a recent immigrant to the United States with almost no credit history, to co-sign the loan. Schnapp’s loan application indicated that his income was $10,000 a month, but the only supporting documentation demonstrated income in the past month of $1,800. The branch manager wrote to a colleague that “this comes from the top” and was an “easy one,” and Schnapp was approved for an unsecured $10,000 loan days after applying. (App. at 16548.) Second, Commerce provided Kemp with mortgages that allowed him to purchase a $225,000 house with no money down. On November 4, 2002, Umbrell reported to the chairman of Commerce that Kemp had requested a mortgage and that Umbrell and a Commerce mortgage representative would meet 9 White, who was on Commerce’s payroll as a consultant, aided in these efforts. 11 with Kemp the following day. Umbrell did meet with Kemp; however, instead of a mortgage representative, the third member of the group was White. The next day, Umbrell approved Kemp’s request to be pre-qualified for a $227,000 mortgage. However, Commerce Bank’s policy was only to provide letters of pre-qualification to those individuals with credit scores of at least 680, and Kemp’s scores ranged from 456 to 526. The government presented evidence that this was not an official Commerce pre-qualification form, but was a singular letter created by Umbrell to benefit Kemp. The initial mortgage was formally approved on November 18, 2002 – before Kemp had even completed an application. Commerce submitted Kemp’s application to its underwriting process, and the application was rejected by the program that Commerce used to rate loans. The report indicated that Kemp’s and his wife’s credit scores ranged from 440 to 528, that Kemp had a past-due liability to Wachovia of over $13,000, and that Kemp owed other creditors an additional $20,000. Thomas Conte, who was the operations manager of Commerce’s mortgage department at the time Kemp’s loan was processed, reviewed the underwriting results and also rejected the application. However, on December 3, 2002, Holck and Umbrell reversed Conte’s decision and approved the loan. While the loan was initially contingent upon Kemp’s repaying the $33,000 that he owed to creditors, a week later, Holck and Umbrell waived that condition. Conte testified that this process deviated from Commerce Bank’s standard underwriting procedures. On December 18, 2002, Commerce’s consumer loan department began processing Kemp’s second mortgage loan, for the additional 20% of the purchase price. Commerce’s usual policy was to advance 100% financing only to individuals with a credit score of at least 650 and no charge-offs in the past seven years. Kemp clearly did not meet those requirements – his credit score, as calculated by this underwriting program, was 433, and his charge-off with Wachovia originated within the previous year – and the underwriting program rejected the application. Nevertheless, Umbrell authorized the loan on the basis of Kemp’s “strong bank relationship,” his position as treasurer, and 12 his income. (App. at 16347-48.) Contrary to Umbrell’s claim that Kemp had a strong relationship with Commerce, the government presented evidence that Kemp’s account with Commerce usually contained less that $1,000. Third, in March 2003, Commerce made a $21,300 automobile loan to Kemp. The applicable credit report showed that Kemp’s credit score was 520, which was still below Commerce’s standard requirement of 650, and that Kemp had a prior bad debt to Wachovia (as described above) and an additional prior bad debt to Summit Bank for a 1990 Pontiac Grand Am. Again, the underwriting program did not approve the loan, and again, Umbrell overrode the declination, based on Kemp’s “strong bank relationship” and “positive previous experience.” (App. at 16361.) Fourth, in June 2003, Commerce approved Kemp’s request for a $480,000 construction loan for his church, which had been damaged by lightning. On June 23, 2003, Miriam D’Elia, an attorney at White’s law office, who was handling the closing for Commerce, informed Kemp that the church would not receive any money until it provided all of its specifications and plans. Kemp then called Umbrell, and Umbrell agreed to disburse money to the church for previous expenses as long as Kemp provided invoices – even without providing proof that the church had paid those invoices. Kemp and the church’s pastor then created false invoices so that the church could procure money for invented expenses. The day after Kemp spoke to Umbrell, D’Elia informed Kemp that Commerce’s closing agent, Valerie Coates, was “very concerned” that the church understood it would not receive any money at the closing. (App. at 12449.) Kemp told D’Elia that Umbrell had approved the church’s obtaining money for costs, and D’Elia responded that Coates was “real upset about that.” (App. at 12450.) Coates then joined the conversation, and stated to Kemp, “[Y]ou’re not expecting any funding [at closing], correct.” (App. at 12452.) Kemp responded that Umbrell had approved the church’s being reimbursed for previous expenses, and Coates said, “Okay, he’s gonna be a bad boy then.” (App. at 12453.) Coates testified that this statement did not mean that 13 Umbrell had acted inappropriately, only that this decision would complicate her work. Kemp and Umbrell spoke again later that day. Kemp asked Umbrell if he would waive any of the closing fees, and Umbrell agreed to waive the $3,500 appraisal fee. The two then discussed the renewal of some of Philadelphia’s certificates of deposit with Commerce. Kemp told Umbrell that Umbrell did not have to work with any of Kemp’s subordinates on the deal, but should talk to Kemp himself, because “I want them to know that you are my f__king guy. . . . So you get special treatment.” (App. at 12459.) Coates then sent an email to Holck, asking him to approve the advance of 80% of the church’s as-is value of $150,000; immediately thereafter, Holck approved. In the file notes for the loan, Coates wrote, “I did what I was told to do.” (App. at 16409.) She testified that this did not denote that she was unhappy with what had occurred, only that her actions had been authorized. Fifth and finally, on July 1, 2003, Umbrell called Kemp, and the two briefly discussed Philadelphia’s deposits with Commerce, and then Kemp stated, “[M]y brother-in-law’s looking to do a small personal loan. . . . What’s the maximum he can do unsecured?” (App. at 12549-50.) Umbrell responded, “[H]ow much does he need, tell me what he needs, ‘cause then I’ll know what pocket to put it in.” (App. at 12550.) Kemp informed Umbrell that his brother-in-law had “shaky credit,” Umbrell asked if it was “bankruptcy bad,” and Kemp responded in the negative. (App. at 12550.) Umbrell responded, “What do you want to go back and promise him? . . . Is [$6,000] enough for you to go back with? . . . I’m trying to make you look good . . . how much do you want to . . . if you want to tell him seventy five hundred, tell him seventy five hundred.” (App. at 12551.) The two ultimately agreed on $7,500, which, as the telephone call made clear, Umbrell approved without so much as seeing an application or speaking to the borrower. The government presented evidence demonstrating that Holck, Umbrell, and Kemp all understood that in return for these loans, Commerce Bank would receive preferential treatment. Most significant 14 were the circumstances surrounding the city’s selection of Commerce to offer a $30 million line of credit in support of the Neighborhood Transformation Initiative (NTI). In order to select the bank that would offer this line of credit, the city instituted a bidding process, in which interested banks would submit competing financial plans to the city. Soon after Commerce’s submission, Kemp told White to tell Commerce, in the future, not to submit its bid first, because then Kemp could tell White about the other bids so that Commerce could then bid accordingly. Later that day, White called Umbrell, and said, “Listen, uh, somebody told me to tell you that when you guys do these things, don’t ever send your stuff in first.” (App. at 12192.) Umbrell responded, “[Y]ou know I love you, right? . . . I know who told you that, . . . and I understand why.” (App. at 12192.) White then called Holck and gave him the same advice. Holck replied, “I know, I know. Corey said to him not to.” (App. at 12198.) Initially, the two best bids came from Commerce and KBC Bank. KBC offered the lowest interest rate, but Commerce offered to defer interest for an initial period. Kemp told White that he planned to call Commerce and convince them to lower their interest rate, which he did, in a subsequent conversation with Holck. Thus, Commerce was given the opportunity to submit a second bid. Around this time Kemp met with Donald DiLoreto, a representative of Wachovia Bank, and they discussed the bidding. After their conversation, DiLoreto emailed Kemp asking if he could submit an improved bid. Kemp never responded. After Commerce submitted its improved offer, Kemp asked his boss, Janice Davis, if they could award the line of credit to Commerce. Davis told Kemp that if one bank was permitted to rebid, every bank must receive the same opportunity. Neither Davis nor the representatives of the five banks who submitted bids expected that any bank would have a chance to enter a second bid. Nevertheless, on Davis’s orders, Kemp opened another round of bidding. After the second round of bidding began, Holck and Umbrell discussed the situation in a telephone call with White. 15 Holck appeared confused by the process, stating “you know we made . . . the revised proposal to Corey? . . . And something’s not smelling right.” (App. at 12256.) White assured Holck and Umbrell that they did not have to worry. This was good advice: Commerce’s new bid, which conformed to Kemp’s demand, was the best one and Commerce won the line of credit. The government presented evidence demonstrating that none of the other banks received any inside information about what to bid. The corruptness of the process was starkly described in a telephone call between Kemp and Reverend Frank McCracken, where Kemp stated: Listen [Commerce Bank] better take care of me man, I’m hooking ‘em up. Did my thing. ‘Cause, I got a conference call at four, three thirty and that’s on ah a line of credit. I got a thirty million dollar line of credit from Commerce Bank for the city. . . . Ah, it was a bid though, it was a bid. And they, um, they bid, they were they were like in second place right, so I called Steve and I said Steve, look, this is what you all got to beat. See, you didn’t hear it from me, but then they came back. (App. at 12557-58.)