A bank acquired by Independent Bank Group Inc. and a Green Bancorp Inc. unit were among several banks that lent to an entity involved in a federal prosecution alleging a multimillion-dollar oil-and-gas fraud. Both banks say the matter will not affect future results.
On Feb. 22, the U.S. Attorney and the Federal Bureau of Investigation announced the arrest of Lawrence H. Wolf on charges of wire fraud and aggravated identity theft. Wolf allegedly defrauded banks and financial institutions for years by falsely claiming an ownership interest in eight particular wells in Wyoming. According to a complaint filed in the U.S. District Court for the Southern District of New York, Wolf pledged royalty interests in income for the extraction of oil and gas but in reality did not have any interest in the family partnership that owned the wells.
The charges, detailed in a deposition by an FBI agent, allege that five different financial institutions were victimized. The complaint identifies only one bank that faced an unpaid debt. Two banks suspected Wolf had forged documents and declined to issue a loan, and two other banks originated credit facilities to Wolf but were paid off in full.
The alleged fraud began in June 2008 when Wolf secured a $3.5 million credit facility from a bank headquartered in Billings, Mont., which the FBI agent labels as Victim Firm-1. After drawing roughly $2 million on that line, Wolf allegedly paid off the facility with a line of credit from Victim Firm-2, a bank headquartered in Houston. The FBI complaint states the line of credit was issued to Estelle Wolf Oil Properties LLC on or about March 27, 2014. S&P Global Market Intelligence data shows Green Bank NA filed a Uniform Commercial Code lien against Estelle Wolf Oil Properties LLC on March 28, 2014.
Michael Barone, senior vice president for Green Bank, confirmed the bank made a loan to Estelle Wolf Oil Properties. Barone said he does not believe Green Bank is Victim Firm-2 because the loan was not for $40 million, as described in the complaint. He said Green Bank's loan to the entity was "perhaps $4.0 million." Dawn Dearden, a spokeswoman for the Department of Justice, confirmed the line of credit from Victim Firm-2 was $40 million. The Universal Commercial Code lien data does not disclose the amount of the loan from Green Bank.
"We actually have no loss or exposure. ... We show a payoff before the action date listed," Barone said in an interview. The FBI complaint states that Victim Firm-2's line of credit was paid off in July 2014 with proceeds from a $7 million credit facility from Victim Firm-3. At that time, Wolf owed roughly $3.6 million on the line of credit from Victim Firm-2.
The FBI complaint alleges Victim Firm-3 executed the credit agreement with Estelle Wolf Oil Properties LLC on or about July 9, 2014. S&P Global Market Intelligence data shows that Northstar Bank of Colorado, which became a part of Independent Bank through mergers, filed a commercial lien against Estelle Wolf Oil Properties LLC on July 16, 2014.
"Northstar Bank was aware of this issue and recognized a loss before Independent Bank acquired them last year in April 2017. We are not exposed to additional losses," Michelle Hickox, CFO for Independent Bank, wrote in an email. The email did not affirm or deny the company's connection with the allegations in the complaint.
The FBI complaint states Victim Firm-3 increased the loan facility to $13 million on or about July 31, 2015. Wolf owed $13.1 million and was in default on the credit facility as of March 22, 2017, and Wolf had not repaid any of the balance as of Feb. 7, 2018, according to the FBI complaint. The complaint stated Wolf used significant amounts of the proceeds on personal expenses such as a $63,000 purchase at an art gallery and numerous purchases of private jet services.