The federal government has taken the unusual step of suing a dead bank president's estate for repayment of bailout funds the bank received during the financial crisis.
The office of the Special Inspector General for the Troubled Asset Relief Program and the Department of Justice are seeking $17.3 million from the estate of Layton Stuart, former owner and president of the OneFinancial Corporation in Little Rock. The DoJ and SigTarp have accused Stuart of misleading the Treasury Department about the company's condition in order to obtain Tarp funds. OneFinancial is the parent company of the $333 million-asset One Bank & Trust.
"Tarp was passed by Congress to stabilize banks and our nation's financial system during a time of crisis, not for the benefit of those who resort to false claims as a pretext for receiving Tarp," said Special Inspector General for Tarp Christy Romero in a statement.
The suit alleges that OneFinancial was healthier than it appeared to be when it applied for a Tarp investment during the 2008 financial crisis. SigTarp alleges that Stuart diverted more than $2 million from One Bank & Trust for personal use after the bank received $17.3 million
In a phone interview late Wednesday, One Bank & Trust President and Chief Executive Officer Jerry Pavlas said, "There are no employees at the bank who are a party to what [the government's] referring to," in its lawsuit. Pavlas himself joined the bank in October 2012, well after the alleged criminal activity took place.
Stuart was fired by OneFinancial in September 2012. According to the Arkansas Times he died in March 2013 after an emergency hospital visit for respiratory distress. However, the government seized $17.6 million paid to his family trust on a $20 million life insurance policy because the Internal Revenue Service believed Stuart may have killed himself to leave his family with the life insurance. Stuart arranged his own funeral five days before it happened, the government alleged in a 2013 filing.