Audrey Strauss, the Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Patricia Tarasca, the Special Agent-in-Charge of the New York Region for the Federal Deposit Insurance Corporation Office of Inspector General (“FDIC OIG”), announced today the unsealing of an indictment charging STEPHEN M. CALK with financial institution bribery for corruptly using his position as the head of a federally insured bank to issue millions of dollars in high-risk loans to a borrower in exchange for a personal benefit: assistance from the borrower in obtaining a senior position with an incoming presidential administration. CALK is expected to be presented this afternoon before U.S. Magistrate Judge Debra Freeman.
Ms. Strauss said: “As alleged, Stephen M. Calk abused the power entrusted to him as the top official of a federally insured bank by approving millions of dollars in high-risk loans in an effort to secure a personal benefit, namely an appointment as Secretary of the Army or another similarly high-level position in the incoming presidential administration. Calk’s alleged attempt to obtain such an appointment was unsuccessful, and the loans he approved were ultimately downgraded by the bank’s primary regulator. Thanks to the outstanding work of the FBI and FDIC OIG, Calk’s alleged corrupt scheme has now resulted in a federal criminal charge.”
FBI Assistant Director William F. Sweeney Jr. said: “As alleged, Calk went to great lengths to avoid banking violations in an attempt to secure a senior position in a presidential administration. He curried favor with an influential borrower, exploited his position as CEO of a bank and its holding company, and exercised control over the bank and the borrower’s loans, intentionally turning his back on the many red flags posted along the way. His attempt at petitioning for political favors was unsuccessful in more ways than one – he didn’t get the job he wanted, and he compromised the one he had.”
FDIC OIG Special Agent-in-Charge Patricia Tarasca said: “Today’s indictment charges Stephen Calk with misusing his position as Chairman and Chief Executive Officer of a bank for his own personal gain. The FDIC Office of Inspector General remains committed to investigating cases where bank officials cause multimillion-dollar losses to a financial institution and undermine its integrity. We will continue to work with our law enforcement partners to bring to justice those who commit such offenses.”
According to the allegations in the Indictment:[1]
CALK, the Bank, and the Borrower
STEPHEN M. CALK is the chairman and chief executive officer of the “Bank,” a federal savings association headquartered in Chicago, Illinois, with an office in New York, New York. The Bank is owned in its entirety by the “Holding Company,” a Chicago-based bank holding company, and CALK is the chairman, chief executive officer, and owner of approximately 67% of the Holding Company.
The “Borrower” was, at all relevant times, a lobbyist and political consultant. Beginning in or about March 2016, the Borrower held a senior role with a presidential campaign (the “Presidential Campaign”), and from June 2016 through August 2016, he served as chairman of the Presidential Campaign. After the Borrower’s formal role with the Presidential Campaign concluded in or about August 2016, the Borrower continued to be informally involved in the campaign. Beginning in or about November 2016, when the candidate for whom the Borrower had been working was elected President of the United States, the Borrower provided informal input to the presidential transition team (the “Presidential Transition Team”).
The Corrupt Scheme
Between in or about July 2016 and January 2017, CALK engaged in a corrupt scheme to exploit his position as the head of the Bank and the Holding Company in an effort to secure a valuable personal benefit for himself, namely, the Borrower’s assistance in obtaining for CALK a senior position in the presidential administration. During this time period, the Borrower sought millions of dollars in loans from the Bank. CALK understood that the Borrower urgently needed these loans in order to terminate or avoid foreclosure proceedings on multiple properties owned by the Borrower and the Borrower’s family. Further, CALK believed that the Borrower could use his influence with the Presidential Transition Team to assist CALK in obtaining a senior administration position.
CALK thus sought to leverage his control over the Bank and the loans sought by the Borrower to his personal advantage. Specifically, CALK offered to, and did, cause the Bank and Holding Company to extend $16 million in loans to the Borrower in exchange for the Borrower’s requested assistance in obtaining a high-level position in the presidential administration. For example, and while the Borrower’s loans were pending approval, CALK provided the Borrower with a ranked list of the governmental positions he desired, which started with Secretary of the Treasury, and was followed by Deputy Secretary of the Treasury, Secretary of Commerce, and Secretary of Defense, as well as 19 ambassadorships similarly ranked and starting with the United Kingdom, France, Germany, and Italy.
In approving these loans to the Borrower, CALK was aware of significant red flags regarding the Borrower’s ability to repay the loans, such as his history of defaulting on prior loans. Moreover, given the size of the loans, the Borrower’s debt became the single largest lending relationship at the Bank. In order to enable the Bank to issue these loans without violating the Bank’s legal limit on loans to a single borrower, CALK authorized a maneuver never before performed by the Bank, in which the Holding Company – which CALK also controlled – acquired a portion of the loans from the Bank.
During the same time period, the Borrower provided CALK with valuable personal benefits. First, in or about the summer of 2016, during the Presidential Campaign – and just days after CALK and the rest of the Bank’s credit committee conditionally approved a proposed $9.5 million loan to the Borrower – the Borrower appointed CALK to a prestigious economic advisory committee affiliated with the campaign. And second, in or about late November and early December 2016 – after the presidential candidate had been elected president, after the Borrower’s first loan from the Bank had been issued, and while a second set of loans worth more than $6 million sought by the Borrower was pending approval by the Bank – the Borrower used his influence with the Presidential Transition Team to assist Calk, recommending CALK for an administration position. Due to the Borrower’s efforts, CALK was formally interviewed for the position of Under Secretary of the Army in or about early January 2017 at the Presidential Transition Team’s principal offices in New York, New York. CALK was not ultimately hired.
As a result of its independent review of the Bank’s loans to the Borrower, in or around July 2017, the bank’s primary regulator, the Office of the Comptroller of the Currency (“OCC”), downgraded the credit quality of those loans to “substandard,” concluding that the Bank’s classification of them as satisfactory had been inappropriate. Moreover, to conceal the unlawful nature of his scheme, CALK made false and misleading statements to the OCC regarding the loans to the Borrower. Among other things, CALK falsely stated to the OCC regulators that he had never desired a position in the presidential administration.
In or about October 2017, the Borrower was charged with federal crimes and the U.S. Government sought the forfeiture of the Borrower’s interests in properties securing the loans he had received from the Bank. The Borrower subsequently ceased making loan payments to the Bank, and the Bank and the Holding Company foreclosed on the cash collateral securing the loans and have currently written off the remaining principal balance – totaling over $12 million – as a loss.
STEPHEM M. CALK, 54, is charged with one count of financial institution bribery, which carries a maximum sentence of 30 years in prison.
The statutory maximum penalty is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the FBI and FDIC OIG.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
[1] As the introductory phrase signifies, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.
