Once one of Miami's most prominent bankers, Eduardo A. Masferrer was found guilty Wednesday of masterminding a $20 million bank fraud and then weaving a web of lies to conceal it. After only a few hours of deliberation, 12 jurors averted their eyes as they filed into federal court in Miami and then sat stone-faced as the court deputy read 16 guilty counts against Masferrer, the former chairman and CEO of Hamilton Bank.
It was a stunning reversal for Masferrer, who was once the toast of Miami banking and charitable circles. During his first trial, the jury deadlocked, resulting in a mistrial last December. Masferrer faces up to 10 to 12 years under federal sentencing guidelines, plus substantial fines and restitution.
U.S. District Judge K. Michael Moore will sentence him on July 26. Masferrer, a former banker in Panama who moved to Miami and took control of Hamilton Bank in 1989, built it into one of South Florida's top trade finance banks. He was known for his charitable largess as well as the loans the bank gave to many Cuban-American-owned start-up companies and larger businesses whose fortunes were linked to the 1990s trade boom.
DETAINED After the verdicts were read Wednesday, Masferrer stood with his wife, Maura Acosta, and hugged his son Eduardo, who had participated in his defense, as he waited for U.S. marshals to escort him to the Federal Detention Center near the downtown Miami courthouse. His defense attorneys, Howard and Scott Srebnick, said they would appeal and were preparing a new bond motion for Masferrer's release. The three prosecutors, Peter Outerbridge, Benjamin Greenberg and Andrew Levi, all assistant U.S. attorneys, left the courtroom without comment. But Alicia Valle, special counsel to the U.S. attorney, said, "We are satisfied with the jury's decision." As his banking star rose, Masferrer's generosity earned him friends - including Miami Dade College President Eduardo Padrón, who attended the first trial and was present for closing arguments Tuesday. Masferrer endowed a teaching chair at the college and many scholarships and made large contributions to other local institutions. Problems began brewing at the bank after Masferrer began dabbling in high-yield securities in risky developing countries.
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LOAN SCHEME The case centered on the sale of problematic Russian loans through a swapping process that concealed the bank's financial losses. Meanwhile, Masferrer collected a $1 million bonus and Hamilton continued to deliver glowing profit reports to shareholders. The Office of the Comptroller of the Currency, however, was growing suspicious, and federal agents seized the bank and shut it down in 2002. Its deposits were transferred to other banks, but losses from the debacle totaled $160 million and almost nothing went to shareholders. Masferrer was indicted on fraud and conspiracy charges in 2004 along with former bank President Juan Carlos Bernacé and the former chief financial officer, John M.R. Jacobs. Both Bernacé and Jacobs pleaded guilty to lesser charges and testified against their former boss at both trials. They are awaiting sentencing.
Retired merchant banker Frederic Z. "Rick" Haller was later added to the indictment. He has declared his innocence and has not been tried.
During his trials, Masferrer's defense contended that the sales of loans from Russia's Gazprombank, the city of Moscow, Vneshtorgbank and Mezhcombank to West Merchant Bank and Standard Bank of London were unrelated sales - and therefore there was no attempt to conceal the nature of the transactions from regulators by lying to bank examiners. But prosecutors presented a series of witnesses who testified that the loan swaps were indeed related. In his closing argument Tuesday, Assistant U.S. Attorney Levi said Masferrer's denials that it was a tit-for-tat swap and his assertion that he forgot the details were not credible. "To this day Mr. Masferrer is the only person in the world who said these were not related transactions, " Levi said.
APPEAL Howard Srebnick said the grounds for appeal would center on testimony that wasn't allowed in the second trial. "The second trial was very different from the first trial; we were not allowed to present the evidence that we presented at the first trial, " Srebnick said. Among the evidence that was barred at one or both trials was the value of the Russian loans, which were discounted as Russia descended into financial chaos in summer 1998. Srebnick said the defense also was not allowed to present evidence of Masferrer's gifts to charity to counter charges that his greed motivated him to conceal bank losses to collect a large bonus.