Ex-Bank of Oswego executives sentenced for fraud

LAKE OSWEGO, Ore (Lake Oswego Review) -- Former CEO Dan Heine was sentenced to 24 months in prison and former CFO Diana Yates received an 18-month term Wednesday for their roles in a conspiracy to commit bank fraud while the two worked at The Bank of Oswego.

U.S. District Court Judge Michael Simon also fined the former executives $1,300 each and required both to serve three years of supervised probation after their release. They were ordered to begin serving their sentences on Sept. 12, following an appeals hearing scheduled for Aug. 7.

Simon imposed several conditions on the defendants' supervised probation, including restrictions on their future financial dealings; both will be required to get approval from their probation officer before applying for credit or taking out a loan. Yates also was ordered not to drink or go to bars without permission once she leaves prison.

Heine and Yates were both found guilty of one count of conspiracy to commit bank fraud and 12 counts of falsifying bank records following a seven-week trial that concluded in November 2017. Wednesday's sentencing hearing was originally scheduled for March 5, but was delayed multiple times after Heine and Yates each filed motions seeking to overturn the verdict or be granted a new trial, all of which were eventually denied.

Federal prosecutors had sought an eight-year prison sentence for Heine and a six-and-a-half year sentence for Yates, according to a government sentencing memorandum filed May 30 in U.S. District Court. Prosecutors also sought five years of supervised release in addition to the $1,300 fines for each defendant.

Simon actually sentenced Heine to 24 months and Yates to 18 months for each conviction, but the judge said the terms would be served concurrently.

"Dan Heine and Diane Yates orchestrated one of the largest and most complex bank fraud schemes in Oregon's history. Their selfish acts of greed are deplorable," said Billy J. Williams, U.S. Attorney for the District of Oregon. "While we urged the court to impose longer sentences, these sentences still serve as a warning to bank executives and others entrusted with fiduciary responsibilities. We will continue to work with federal investigators to protect investors and ensure the trustworthiness of our financial institutions."

The first two hours of the sentencing hearing on Wednesday were devoted to witness testimony and focused primarily on the finer points of the sentencing guidelines that Simon would use to help determine the sentences for Heine and Yates.

The two defense teams disagreed with government prosecutors about a number of the guidelines, particularly those relating to damage suffered by the Bank of Oswego itself and the FDIC. Government and defense witnesses offered competing assessments of the amount of damage the bank sustained as a direct result of the former officials' actions.

Heine, a co-founder of the bank, was president, CEO and member of the board of directors from September 2004 through his retirement in September 2014. Yates, also a co-founder, was executive vice president, CFO and secretary of the board of directors from 2004 until she resigned in March 2012.

Both were arrested and arraigned on June 26, 2015. Heine was in Florida at the time and now makes his home there, while Yates still lives in Oregon.

The former bank officials were charged with concealing the true financial condition of the bank from regulators and the board of directors by falsely reporting that the bank had title to a property in a straw-buyer transaction, falsely reporting that delinquent loans were paid and falsely reporting the sale of bank-owned property.

Their defense teams sought to place most of the blame on the bank's former chief loan officer, Geoff Walsh. Walsh separately pleaded guilty to fraud and served as a government witness in the trial of Heine and Yates; he was sentenced in January to 30 months in prison.

Attorneys for Heine filed their own sentencing memorandum last week, highlighting Heine's life and work and asking the court to sentence him to a term of probation with a possible period of home confinement.

The memorandum noted that Heine is 71 years old and has a heart condition and family history of heart disease, and argued that any prison sentence would risk becoming a life sentence.

The memorandum also stated that Heine would appeal the case to the Ninth Circuit Court if he was sentenced to a prison term, and requested that the District Court grant him bail pending appeal in that case. On Wednesday, an attorney for Yates said she also plans to appeal the sentence.

The Lake Oswego Review is a KOIN 6 News media partner.

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