CommunityOne Bancorp (COB) in Charlotte, N.C., has been freed from the threat of prosecution for allegedly ignoring a $40 million Ponzi scheme run by a customer.
A U.S. District Court in North Carolina dismissed a case alleging that CommunityOne's banking unit permitted the scheme to be operated through accounts at the bank, CommunityOne announced Monday. A deferred-prosecution agreement that CommunityOne entered with the U.S attorney was also terminated.
The $2 billion-asset CommunityOne entered the deferred-prosecution agreement in October 2011 as part of a recapitalization deal. The company agreed to overhaul its anti-money laundering and Bank Secrecy Act programs as part of the agreement. Prosecutors said CommunityOne failed to file suspicious-activity reports on the customer's transactions.
CommunityOne also paid $400,000 in restitution to victims of the alleged Ponzi scheme, the Department of Justice said in 2011. The operator of the alleged Ponzi scheme, Keith Franklin Simmons, deposited more than $35 million in his investors' funds an account held at CommunityOne over more than two years, prosecutors claimed. In 2010, a jury convicted Simmons of securities fraud, wire fraud and money laundering.
The private-equity firms Carlyle Group and Oak Hill Capital partners led CommunityOne's $310 million recapitalization in 2011, allowing it to purchase the struggling bank of Granite. The deferred-prosecution agreement was a condition of the two banks' merger.