On December 18, 2017, three individuals, including the former CEO and former Chief Loan Officer of defunct Sonoma Valley Bank (“SVB” or the “Bank”) were convicted by a federal jury of multiple criminal charges that stemmed from a series of schemes carried out between 2004 and the Bank’s collapse in August 2010.  Former SVB CEO Sean Clark Cutting and former CLO Brian Scott Melland were convicted following an eight-week trial in U.S. District Court for the District of Northern California of conspiracy, bank fraud, wire fraud, money laundering, falsifying bank records, making false statements to regulators, and other crimes.  Co-defendant David John Lonich, a California attorney for a now-deceased real estate developer allegedly involved in the executives’ fraud, was also convicted of conspiracy, bank fraud, wire fraud, and attempted obstruction of justice.  According to filings made by the government and evidence introduced at trial, Cutting, Melland, and Lonich carried out multiple schemes that defrauded the Bank, state and federal regulators, and other financial institutions.  Authorities maintained that these schemes, which involved the extension of loans to the real estate developer in excess of legal lending limits and the use of “straw” or nominee borrowers, resulted in millions of dollars of losses to taxpayers and federal agencies.  Evidence introduced at trial showed that Melland and Cutting took steps to conceal the illegal loans and made false statements during examinations by the Bank’s regulators in 2008 and 2009.  Cutting and Lonich were also shown to have gained control of real estate through the use of fraudulent letters issued on Bank letterhead that falsely stated nominee borrowers had sufficient funds on deposit to purchase property.  Cutting, Melland, and Lonich are scheduled to be sentenced before the Honorable Susan Illston on April 27, 2018.  U.S. v. Cutting, 17-cr-00139 (N.D. Ca.)

DOJ Press Release