A former bank CEO has been handed an 18-month prison sentence for his role in a scam involving diamonds and gold from Africa.
Robert John Hager, 70, pleaded guilty in May 2020 to making a false entry in bank records. He was sentenced March 2 by Judge Patrick J. Schiltz in U.S. District Court.
Hager was the chief executive of Border State Bank in Greenbush, MN, and served as a director of the bank’s holding company, Border Bancshares Inc..
According to a press release from the U.S. Attorney’s Office for the District of Minnesota:
HAGER also held various executive positions in banks that Border Bancshares, Inc. acquired, including the former First State Bank of Clearbrook and the former First Advantage Bank. In late 2015 and early 2016, HAGER loaned money to a bank customer to invest in a diamond and gold venture in Liberia, Ghana, and Kenya that promised a quick return. After he depleted his own personal funds on the investment and maxed out the amount he could borrow from the bank, HAGER asked other individuals, including bank customers, shareholders, and directors of the bank to lend him money, which would enable HAGER to recover his personal funds.
According to the defendant’s guilty plea and documents filed with the court, between 2016 and 2017, HAGER requested a series of loans by having Border bank customers take out loans in their own names, or draw from loans they already had, and then transfer the funds to HAGER. In May 2016, HAGER issued three unauthorized Standby Letters of Credit (SBLCs) worth $1.6 million to facilitate the purchase and delivery of diamonds and gold from Africa. In each instance, Hager issued the SBLC on the letterhead of First Advantage Bank and signed the letter as CEO of First Advantage. Letters of Credit are considered obligations of a bank, and they can impact a bank’s financial standing. Such obligations must be entered into the bank’s general ledger so that they can be accounted for and tracked by regulators. In order to conceal his actions, HAGER failed to report the SBLCs to bank personnel so that they could be logged into the bank’s system.
The Grand Forks Herald reports that Hager’s attorney’s argued that he was the victim of a scam, although he made criminal decisions.
Judge Schiltz largely agreed.
“To be clear, Mr. Hager was mostly the victim and not a perpetrator of this fraudulent scheme, albeit not a terribly sympathetic victim,” the judge said during sentencing, according to the Herald. “Mr. Hager was so eager for riches and so arrogant about his own abilities that he ignored one warning sign after another that he was being swindled.”
And ultimately, Schiltz said, he abused his role as a bank CEO.
In addition to the prison term, Hager was sentenced to two years of supervised release.
The case was the result of an investigation conducted by the Office of Inspector General for the Federal Reserve Board, the Office of Inspector General for the Federal Deposit Insurance Corp., and the FBI.
This case was prosecuted by Assistant U.S. Attorney Amber M. Brennan.