CARNEGIE — The Federal Deposit Insurance Corporation has levied sanctions against three former officers of The Farmers Bank of Carnegie for improper activities.
The allegations included:
• “Insider abuse” for extending six-figure loans to the then-CFO’s brother, who is now in federal prison on convictions for health care fraud and opioid distribution that resulted in five deaths.
• The former president charged almost $400,000 in personal expenditures to the bank.
• All three former officers were sued for allegedly deceiving three investors, costing them millions of dollars.
Lawrence D. “Larry” Johnson, former chairman of the bank’s board of directors, was banned from participating “in any manner in the conduct of the affairs of any financial institution or organization.”
The FDIC accused Johnson of engaging in “unsound banking practices, breaches of
fiduciary duties, and violation of law or regulation” that led to an “Order of Prohibition from Further Participation.”
Johnson signed a stipulation and consent to the prohibition order Dec. 6, 2022, but neither admitted nor denied the accusations. The FDIC announced the administrative action Feb. 24.
The FDIC said between January and August 2018, Johnson failed to “prudently or diligently carry out his oversight responsibilities” as a director of The Farmers Bank.
This included “ignoring a bank officer’s misuse of bank funds” which resulted in “numerous overdrafts of the bank’s operating account …” Those overdrafts reportedly soared to $128,000.
In addition, the FDIC wrote, Lawrence Johnson facilitated and accepted loans from the bank “that were on better-than-market terms and without required pre-approvals.”
Johnson “caused the bank to suffer financial loss” and “received financial gain or other benefit,” the FDIC said. The bank’s losses were not specified in the FDIC order.
The order prohibits Johnson from participating in any manner in the banking industry; voting for a director or serving or acting as an institution-affiliated party; or soliciting, procuring, transferring or voting any proxy, consent or authorization with respect to any voting rights in any financial institution.
The prohibition order remains in effect unless the FDIC decides to modify, terminate, suspend or set aside the order.
Lawrence D. Johnson was the latest director of Farmers Bank penalized by the FDIC.
Aaron D. Johnson, son of Lawrence Johnson, previously was the bank’s president and chief executive officer and vice chairman of its board of directors.
In September 2019, Aaron Johnson entered into a consent decree with the FDIC. He was accused of engaging or participating in “violations, unsafe or unsound banking practices, and breaches of fiduciary duty as an institution-affiliated party” of the bank.
For example, he caused the bank “to pay for numerous expenses that were charged to his personal credit card, and which were for the personal benefit of himself or his family.”
Consequently, the bank “suffered financial loss or other damage” and Johnson “received financial gain or other benefit.” Those actions involved “personal dishonesty and demonstrated” Johnson’s “willful and continuing disregard for the safety or soundness” of the bank.
The FDIC barred Aaron Johnson, like his father, from participating “in any manner in the conduct of the affairs of any financial institution or agency …”
The FDIC also imposed an administrative enforcement action in September 2022 against Tracy L. Robison, former chief financial officer and a former director of the bank.
Between July 2017 and August 2018, the FDIC said, Robison “provided critically deficient oversight of senior management’s compliance with laws and regulations, insider abuse, conflicts of interest, poor internal controls, and weak credit underwriting and administration” and “engaged in acts and omissions that resulted in multiple violations of law or regulation.”
Robison’s actions were “recklessly unsafe and unsound and were part of a pattern of misconduct.”
Without admitting or denying the allegations, Robison agreed to a $2,500 civil money penalty, the FDIC reported.
Robison is the sister of Melvin Lee Robison, a former doctor who borrowed more than $600,000 from the bank and now is serving a federal prison sentence for operating a “pill mill” in Sayre.
Same name but new operation
“This is a totally different bank,” President Clint Stone told Southwest Ledger. “We have new directors and shareholders, and we’ve recapitalized.”
Farmers Bank is profitable now and has been for the last few years, he said.
“We’re proud to be part of the community in Carnegie and in Oklahoma City,” Stone added.
“The Johnsons are behind us,” he said. “I wish that wasn’t part of our history, but it is.”
Stone was a banker in Oklahoma City for more than 40 years and was retired when he was tapped to be president of Farmers Bank.
Regulatory, legal troubles began in ’18
Shortly after opening its branch bank in Oklahoma City’s Midtown district on April 9, 2018, The Farmers Bank of Carnegie “found itself entangled in various regulatory and legal problems,” Oklahoma Gazette noted in a story published on Aug. 28, 2019.
The bank engaged the accounting firm BKD in October 2018 to prepare a “forensic accounting report on Aaron Johnson’s American Express credit card to determine which charges were for personal expenses and which were business expenses between June 16, 2017, through Aug. 17, 2018, a court document relates.
Aaron Johnson became the president and chief executive officer of the bank in 2016, at the age of 34.
BKD determined that Johnson was responsible for $398,389 in personal charges on the AmEx card. He reimbursed the bank for $371,000, leaving a balance due of $27,389 plus $18,171 in interest owed on the personal charges.
Farmers Bank sued Johnson in Oklahoma County District Court in June 2019 for breach of fiduciary duty, for the amounts still due, plus $35,504 to recover the cost of the audit, $48,604 in audiovisual equipment for Johnson’s home that was charged to the bank, and $5,000 for a cash-out ticket that was drawn on the bank. That adds up to more than $134,000 that Aaron Johnson allegedly still owes the bank.
The court case has been pending since October 2022, court records show.
Three investors sue bank directors, holding company
Aaron Johnson stepped down and was replaced as president of the bank in February 2019. But prior to his departure, another lawsuit claims, he facilitated a stock sale while withholding key information from investors R.D. Smith, his brother Greg Smith, and Derrick Ott, all of Oklahoma City.
FBC is a holding company that owns the bank.
“The stock of the bank is the only asset of FBC,” the lawsuit claims.
In 2017 and 2018, Lawrence and Aaron Johnson approached Ott and the Smiths about buying stock in FBC.
At that time, Aaron Johnson was the president and CEO of the bank. Larry Johnson was chairman of the bank’s board of directors and Aaron Johnson was the vice chairman, and the Johnson family had owned a majority interest in the bank for six decades, since Aaron Johnson’s grandfather bought it in 1953.
Aaron Johnson assured the three complainants that the bank was profitable and that their investment was “prudent” and “safe,” the plaintiffs contend.
Consequently, between December 2017 and November 2018, the three plaintiffs collectively bought 1,089 shares. The bulk of the shares were acquired from FBC, while the remainder were purchased from Lawrence Johnson and from Tracy Robison.
However, Aaron and Lawrence Johnson, Tracy Robison and Farmers Bancapital Corp. didn’t tell the plaintiffs that all of the bank’s stock had been previously pledged with a loan to FBC from First State Bank in Anadarko. Thus, the defendants “induced the plaintiffs to buy stock in an entity whose only substantial asset was pledged to another bank,” the lawsuit alleges.
In addition, the defendants failed to disclose that FBC “owed several hundred thousand dollars to a trust” owned by Lawrence Johnson’s mother.
The defendants also failed to inform the three investors that the bank’s principals “had been operating the bank in an unsafe and unsound manner for a considerable time,” and as a result government regulators had taken “supervisory actions.”
Because of these “material omissions,” the three investors have suffered damages “in an amount that cannot be currently determined but which is believed to be several million dollars.”
Larry and Aaron Johnson and Tracy Robison denied the allegations.
The case is still pending; no action has occurred since August 2022, records of the Oklahoma State Courts Network show.
Regulators imposed mandates in 2019
A 25-page consent order against the Carnegie bank was imposed in February 2019. The document was signed by Serena L. Owens, deputy regional director of the FDIC, and Oklahoma Banking Commissioner Mick Thompson.
Among its myriad requirements:
• The bank “shall have and retain qualified management.” In February 2019, the same month the bank’s board of directors signed the consent order that spelled out changes mandated by the FDIC, Farmers brought in David Braly as the new president to succeed Aaron Johnson. However, within six months Braly was gone, replaced by veteran banker Clint Stone, president, and Deana Hill, vice president.
Tracy Robison, who was hired by Aaron Johnson to be the bank’s CFO, left shortly after Johnson’s departure.
• The Carnegie bank must be operated in “a safe and sound manner.”
• During the 27 months the consent order was in effect, the bank was required to notify the regional director and the state commissioner of any changes in management.
• The bank’s board of directors “shall increase its participation in the affairs of the bank by assuming full responsibility for approval” of the institution’s policies and objectives “and for supervision of the bank’s management …”
• Two new, independent directors with prior banking experience had to be added to the board. Neither could be an officer of the bank, own more than 5% of the bank’s outstanding shares, nor be related by blood or marriage to an officer or director of the bank.
The bank’s current directors are David Peetoom, Greg Johnson, Robert Dean Smith, Clint Stone and Brent Hillery, according to the state Banking Department.
• Farmers Bank was forbidden from declaring a cash dividend while the consent order was in effect.
• The bank was ordered to increase its Tier 1 capital to a level “that satisfies the minimum ratio required as a non-standard condition to the March 7, 2018, approval to establish” the branch bank in Oklahoma City.
The consent order was terminated May 25, 2021, FDIC records reflect.
In a “supervisory prompt corrective action directive” issued Nov. 8, 2019, the FDIC declared that The Farmers Bank of Carnegie was deemed “significantly undercapitalized” and the bank’s management “has not demonstrated the ability to return the bank to a safe and sound condition.”
The FDIC commandment instructed the bank to increase its capital “to a level sufficient to restore the bank to an ‘adequately capitalized’ category” within 45 days by selling common stock, selling preferred stock, and/or by direct contributions of cash by the bank’s directors and/or shareholders.
The directive was lifted a year later, on Nov. 6, 2020.
Ex-CFO’s brother indicted on 159 federal charges
Melvin Lee Robison was indicted in June 2018 by a federal grand jury in Oklahoma City on 159 felony counts accusing him of operating a “pill mill.”
The charges said between September 2015 and April 3, 2017, Robison and Dr. Moheb Hallaba, an 89-year-old physician he employed at his medical clinic in Sayre, signed hundreds of prescriptions per week without reviewing patient files or seeing patients.
This occurred despite the fact that the State Board of Osteopathic Examiners decreed in June 2016 that Robison could no longer write prescriptions for controlled drugs.
Nevertheless, Robison and Hallaba were accused of distributing opioids such as hydrocodone, morphine, fentanyl, oxycodone and oxycontin, along with benzodiazepines such as diazepam, lorazepam and clonazepam.
As many as 90 to 100 patients visited the clinic each day, and nurse practitioners “saw nearly all of the patients,” even though nurse practitioners are not licensed to prescribe controlled substances.
Robison and Hallaba were charged with 54 counts of distributing controlled substances outside the usual course of professional medical practice and without legitimate medical purpose. The distribution of those drugs resulted in five patient deaths, prosecutors pointed out.
Robison also was charged with 51 counts related to fraudulent Medicare billing. He was accused of, among other things, billing for services performed while he was out of the country and submitting invoices for care of patients in nursing homes without having performed those services or supervising people who provided them.
While those charges were pending, Robison also was charged in the Southern District of Florida on June 11, 2021, with one count of conspiracy to pay health-care kickbacks.
Robison, 68, then living in Colorado, pleaded guilty in Oklahoma City’s federal court last October to one count of illegal drug distribution and one count of aiding and abetting health care fraud. He also pleaded guilty to conspiracy in the Florida case.
Oklahoma Western District Federal Judge Timothy DeGiusti sentenced Robison to 54 months in federal prison on his two Oklahoma-based charges and 24 months on his Florida case. The sentences are to be served concurrently.
Robison also was ordered to pay a $13,362 fine, pay restitution of $112,384 to the Centers of Medicare & Medicaid Services and forfeit $202,597.
The criminal charges against Hallaba were dismissed Nov. 15, 2019, at the request of federal prosecutors.
Melvin Robison got $608K in loans after his indictment
In October 2018 – four months after Melvin Robison was indicted in OKC federal court – The Farmers Bank lent Robison and his wife, Stephanie, more than $608,000. The signatory on the documents was Aaron Johnson.
Less than a year later, in July 2019, the bank filed suit in Oklahoma County District Court against the Robisons and two companies, Proximity Health Care and PLS Scientific.
Proximity Health Care was formed in August 2017 and PLS Scientific was created in February 2018; Stephanie Robison is listed as the registered agent for both companies on records filed with the Oklahoma Secretary of State.
Proximity owed Farmers Bank $108,234 on one promissory note issued in October 2018 and $50,000 on another. PLS Scientific owed the bank $399,927 on one promissory note issued in October 2018 and $50,000 on another, and Melvin and Stephanie Robison “jointly and severally guaranteed the liability” of Proximity Health Care and of PLS Scientific, the petition claimed.
That lawsuit was settled in February 2021, court records show.