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Bank of America exec arrested for bribery. Feds say banker ran kickback scheme.

By Austin Weinstein, The Charlotte Observer on

Published in Business News

Phelps replied: "If you can raise a bit would br (sic) better ... . Up the receivable a bit ... . Couple hundred thousands."

Dodging audits

One problem with the scheme: Bank of America, like all major banks, has teams of auditors and compliance staffers whose job it is to ferret out fraud. A close look at Starnet's books might catch the goosed numbers.

The specific mechanics aren't clear from the court filings, but Phelps says in texts cited in an FBI affidavit that he helped Starnet dodge the bank's audits. Text messages cited by the FBI show Phelps telling a Starnet executive that another unnamed Bank of America employee had joined in on the scheme.

"Get me the finsncials (sic) and let me see what I can do with or (sic) friend" Phelps said in a text exchange from 2014. "I have an idea. But we need to get this done before he leave (sic). Especially the no audit thing. You know what I mean."

Arbolino, Swenson and Brink pooled their cash to pay the bribes, which were hand-delivered in FedEx envelopes, the FBI and prosecutors allege.

Phelps also indicated in text messages that he was paying bribes to others inside the bank. In a text message exchange from 2014, the FBI's Hernandez said, Phelps was referring to another bank employee when he wrote, "(A)ss clown wants 14 ... I said no. Got him to 10." Hernandez said the numbers referred to a $10,000 bribe in connection with avoiding an audit.

 

The filings do not indicate whether any other Bank of America employees are under investigation. Phelps oversaw a team of 11 relationship managers, according to his LinkedIn page.

Phelps may have run a similar bribery scheme with other companies, according to texts Phelps sent that the FBI cited. In 2017, Phelps sent a Starnet executive saying "By the way this stuff ... is what has kept you and the other three clients in their current status." Hernandez said that the "stuff" in question was bribes.

Matthew Reilly, a spokesman for New Jersey's U.S. Attorney, said that the charges remain pending against Phelps, but declined to elaborate. "Not much else we can say at this point," Reilly said. Starnet's line of credit came due in 2019, according to prosecutors' filings. It has not been repaid.

To Lormel, the security consultant, the biggest unanswered question is the true scale of the bribery.

"If there's any credibility about him being able to bribe other people in the bank, that's a much broader problem," Lormel said. "The regulators are going to need to determine if this is a one-off situation."

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