Saint Louis Real Estate Developer Sentenced In Bank Fraud Scheme

ST. LOUIS, MO — Michael Litz, a 63-year-old St. Louis-area real estate developer who pleaded guilty to defrauding a Sedalia bank in an insider loan scheme, was sentenced to 36 months in federal prison Monday and ordered to pay more than $5 million in restitution.

Litz was the third person involved in the scheme to plead guilty. He and two others were charged with bank fraud following the failure of Excel Bank in 2012. Litz's realty companies were delinquent on more than $100 million worth of loans from another bank and used Excel Bank loans to pay off those delinquencies, prosecutors said. A close friend of Litz worked at Excel Bank and helped Litz secure loans through straw parties.

Shaun Hayes, the bank's controlling shareholder, was also convicted of participating in the scheme, using some of the money to pay off a joint liability with Litz. Prosecutors say that constituted unlawful self-dealing.

"Michael Litz used his connections to banker Shaun Hayes to commit fraud. The two men worked together to enrich themselves at the expense of Excel Bank," said special agent in charge Richard Quinn of the St. Louis Division of the FBI. "This type of self-dealing and fraud violates the integrity of our banking system and undermines consumer confidence."

Due to the loan scheme, Excel Bank lost $4 million dollars it received from the Troubled Asset Relief Program, an initiative signed into law by President George W. Bush to strengthen America's banking sector in the wake of the 2007-08 financial crash. TARP special inspector general Christy Goldsmith said the convictions are an important step in the fight to protect the public's investment.

"Banker Shaun Hayes, as the majority shareholder of Excel Bank, controlled the bank's lending," she said. "He directed former executive vice president Tim Murphy to increase dramatically the bank's commercial and real estate lending. So called 'friends of Shaun' loans were approved absent Excel Bank's normal underwriting safeguards such as appraisals — putting the bank at risk. Hayes also made the bank issue millions of dollars in loans to straw borrowers, concealing that the loans personally benefited himself and his business partner, Michael Litz."

Hayes will be sentenced next week.

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