Opinion ID: 2756545
Heading Depth: 3
Heading Rank: 5

Heading: The December 2005 Loan

Text: In October 2005, Hulse approached Crouch about taking out a second loan of approximately $60 million to purchase a coal property in Western Kentucky, again using bonds as collateral. That month, Hulse faxed Crouch a document claiming that the second loan would be used to purchase the property, provide working capital, and finance site development and expansion (“October 2005 fax”). This fax did not indicate that the second loan would be used to buy bonds. Additionally, in November 2005, Hulse faxed to Crouch another document representing that the second loan would be used for the purchase of property, approvals, engineering, marketing, administration, consultants, and working capital (“November 2005 fax”). This fax did not indicate that the loan proceeds would be used to purchase bonds. Crouch recommended and received the necessary approvals for the second loan, and in December 2005, the Bank made the second loan, totaling around $68 million. The second loan, which paid off and took the place of the first loan, contained an Amended Pledge Agreement, signed by defendant Teers on behalf of Tri-Star, providing that the bond portfolio serving as collateral needed to be large enough to cover the interest payments on the loan. 8 Case: 13-15677 Date Filed: 12/02/2014 Page: 9 of 49 After the second loan proceeds were disbursed, defendant Teers used around $20 million of the funds to purchase the bonds that were added to the initial $16 million in collateral account. Put simply, the collateral didn’t exist at the time the loans were made. Instead, loan funds totaling about $36 million were used to purchase the bonds that had been pledged as collateral for the loan itself. Summary charts, admitted into evidence, show that Hulse, Teers, and Mock personally benefitted from the loan proceeds. Specifically, Hulse spent more than $2 million of the money, including to make cash transfers to his checking account, pay off loans, purchase a home and vehicles, to pay family members, and to purchase vacations, jewelry, antiques, and other luxury goods. Teers profited primarily through commissions, with Tri-Star receiving approximately $1.1 million in commission on the purchase and sale of bonds for H&H. Teers’s share of the commission was more than $590,000. Additionally, in February 2006, H&H paid more than $900 for plane tickets for Teers and his wife to visit Las Vegas. In September and October 2006, H&H wrote Teers checks totaling $4,500. Following the first loan, Mock received $50,000 in the form of checks payable to him and to a car dealer. Mock was also put on H&H’s payroll and, from October 2005 through October 2007, received payments totaling more than $100,000.