McHenry County Blog

A press release from the U.S. Attorney’s Office:

OWNER OF BANKRUPT HOME BUILDING COMPANY INDICTED ON FEDERAL BANK FRAUD CHARGES RELATED TO COLLAPSE OF ALGONQUIN PROJECT

The Algonquin Riverside Square condo project in 2009. Most refer to the building as “Tyvek Towers.”

CHICAGO — The former owner of an area home building company that went bankrupt in 2008, leaving unfinished a commercial and residential property development in northwest suburban Algonquin, is facing federal bank fraud charges related to the collapse of the project, known as Riverside Square.

The defendant, Bruce Hawkins, who owned Aspen Homebuilders, Inc., was arrested yesterday in Denver, where he now lives, after being indicted last week by a federal grand jury in Chicago.

Hawkins, 62, formerly of Algonquin, was charged with eight counts of bank fraud for allegedly defrauding Amcore Bank of more than $1 million. He was released on a $25,000 unsecured bond after appearing yesterday in Federal Court in Denver, and he was ordered to appear for arraignment at 11:30 a.m. on Nov. 27 before U.S. Magistrate Judge Jeffrey Gilbert in U.S. District Court in Chicago.

The charges were announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, and John Lucas, Special Agent-in-Charge of the Federal Deposit Insurance Corporation Office of Inspector General in Chicago.

According to the indictment, in September 2006, Hawkins, acting through Riverside Square, LLC, obtained a $13.54 million commercial loan to finance the construction of Riverside Square, located at 1100 West Algonquin Rd.

Between January 2007 and June 2008, Hawkins fraudulently obtained slightly more than $1 million in loan proceeds from Amcore Bank by submitting

• false contractor statements,
• waiver of liens, and
• contract invoices that requested funds purportedly for permits, construction work, and consulting work for the development,

the indictment alleges.

To obtain funds from the bank loan, Hawkins allegedly submitted false contractor statements to the bank in which he verified that subcontractors and his company were owed funds for work performed on Riverside Square.

Hawkins submitted, and caused the submission of, false lien waivers and invoices for work performed to the title company, which was designated by Amcore Bank to keep and disburse funds for the project, the charges allege.

After these documents were submitted, the bank authorized the title company to disburse funds to Hawkins and the subcontractors.

The indictment seeks forfeiture of at least $1,017,183.

Each count of bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorney Sunil Harjani.

The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.

An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

A press release from the U.S. Attorney’s Office:

WOODSTOCK MAN PLEADS GUILTY TO FEDERAL
BANK FRAUD AND MONEY LAUNDERING CHARGES

ROCKFORD — A Woodstock, Ill., man pleaded guilty today in Federal Court to charges of bank fraud and money laundering. JON C. SHAIN, 50, admitted that he defrauded Amcore Bank (now known as BMO Harris Bank) in pleading guilty before U.S. District Judge Philip G. Reinhard, who scheduled Shain’s sentencing hearing for 9:30 a.m. on Dec. 2, 2011.

According to court documents, Shain sought a loan from Amcore in the late summer and early fall of 2004 to start a business to coat metal parts.

In October 2004, Shain created Coating Technologies, Inc., and served as its only officer and director. In November 2004, Amcore agreed to loan Coating Technologies $884,000 to purchase a building and equipment.

In June, July and August of 2005, loan proceeds were paid to Coating Technologies by Amcore based upon settlement sheets provided by Shain, with accompanying invoices and documents in support of the purchase of equipment.

However, as stated in a written plea agreement, Shain submitted false and fraudulent invoices regarding the purchase and price of equipment and related services, among which were invoices from Industrial Equipment Supply Corp., and Qualified Industrial Services.

According to the plea agreement, Shain was also doing business as Industrial Equipment Supply Corporation, but used a false address and concealed his ownership to avoid any further inquiries by Amcore.

In addition, Qualified Industrial Services was a sham device used by Shain to defraud Amcore, using the name and address deceptively similar to an actual business Shain had transacted business with in South Carolina.

The plea agreement also provides that in February 2006, Coating Technologies and an unrelated business combined to do business as Barron Finishing Technologies, Inc., created and owned by a partnership that included Shain and in which he served as President.

Barron Finishing obtained Amcore loans of more than $2 million to purchase real estate and equipment.

The plea agreement states that Shain submitted false and fraudulent invoices and documents to Amcore to draw proceeds from Amcore loans to the partnership and Barron Finishing, drawing hundreds of thousands of dollars more than the actual cost of equipment, and using the loans to acquire real estate that was not permitted by the terms of the loan.

Shain admitted that after depositing part of the proceeds from the bank fraud scheme into a Qualified Industrial Services Chase Bank account, he issued a check to Industrial Equipment, which he later used in part to purchase property on Hydraulic Road, in Rockford, in the name of Industrial Equipment.

The plea agreement states that Shain separately withdrew $68,000 and $90,000 from Industrial Equipment, knowing it was money derived from loans he fraudulently obtained from Amcore, and used the money to purchase property on Chatsworth Drive and Stratford Avenue, located in Rockford, both in the name of Rock River Reality, LLC, an entity Shane alone controlled.

In the plea agreement, Shain acknowledged that the real and personal property located on Hydraulic Road, Chatsworth Drive, and Stratford Avenue, all in Rockford, constitute proceeds of the violations and that the property is subject to forfeiture.

Bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine; and each count of money laundering carries a maximum penalty of up to 10 years in prison and a fine of up to $250,000. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.

The guilty plea was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorney Michael D. Love.

Former Amcore Bank branch on Route 14 at Pingree Road in Crystal Lake will be closed in mid-September.

The bank labeled “Amcore, Now Harris” on Crystal Lake’s Route 14 is scheduled for closure September 18th.

That’s what the letter from Barbara Dirks, Harris’ Senior Vice President for Branch Distribution tells me.

With a branch located across from Pauly Toyota on Route 31 and another at the corner of the failing shopping center deserted by Walmart next to the new Route 14 entrance of the new Vulcan Lakes (oops, Three Oaks) Recreation area, the Chicago-based bank owned by the Bank of Montreal clearly did not need another branch in town.

So, Crystal Lake will have a prime corner vacancy across from the Around the Clock restaurant.

It’s pretty perfect for a bank building. Even better now that the Pingree Road Train Station is down the road.

I wonder if Harris will allow the property to be sold for such a purpose.

That’s what the sign said when I drove up to the Crystal Lake branch of what used to be Amcore Bank.

The Route 14 side of Crystal Lake's Amcore Bank branch on the very misty day when it re-opened as a branch of Harris Bank.

I drove over to the Crystal Lake Branch of what used to be Amcore Bank this morning before the doors open, but after the drive-in window were available to customers.

There were folks in offices looking at paper, maybe from the FDIC.

Cars in yesterday's Crystal Lake Amcore, now Harris Bank parking lot on the day after the takeover.

Lots more cars in the parking lot than when the Feds seized the bank.

Message from Harris Bank mainly to its new customers.

On the front door was a notice from Harris Bank saying it had taken over operation and how it was “pleased to “serve all of our new and valued customers.”

Continue using your own branch is the message to both new and former Harris customers. Notice will be sent when the systems are merged.

FDIC Press Release about the takeover of Amcore by Harris Bank at the drive-in window.

On the window next to the drive-up station, there was a press release from the FDIC. No way a customer could read it, but I I published it yesterday.

Amcore Bank in Crystal Lake is at the corner of Route 14 and Pingree Road.

Broadway Bank may be capturing the headlines because of its family connection to Alexi Giannoulias, the Democratic Party’s candidate for U.S. Senator, but the big Illinois bank going down in Illinois is Amcore.

Amcore has $3.8 billion in assets, while Broadway has a comparatively small $1.2 billion.

It has had a significant presence in McHenry County since purchasing the First National Bank of Woodstock.

Front entrance of the Crystal Lake Branch of Amcore Bank.

There was no unusual activity at the Crystal Lake Branch of Amcore Bank at its 6 o’clock closing time.

No men in black suits entering the building at the six o’clock closing time.

The Amcore sign was still on the door at 6 PM.

No new sign on the entrance door.

These folks were among the last custormers of Amcore Bank.

Nevertheless, the Wall Street Journal’s Market Watch, among others, is reporting that Harris Bank is taking over all of Amcore’s branches, as of Saturday morning.

Tellers at the drive-up window at Cyrstal Lake's Amcore branch beteen shortly before the 6 o'clock closing time.

Here are the guts of the transaction:

The assumption of approximately U.S. $2.1 billion in deposits

• Acquisition of approximately U.S. $2.5 billion in assets, including approximately U.S. $2.0 billion in loans
• All loans are covered by an 80/20 loss share agreement with the FDIC covering 80% of potential loan losses
• Approximately U.S. $2.4 billion in trust, investment and brokerage assets under management

Here is the Federal Deposit Insurance Corporation’s press release:

HARRIS NATIONAL ASSOCIATION, CHICAGO, ILLINOIS,

ASSUMES ALL OF THE DEPOSITS OF AMCORE BANK,

NATIONAL ASSOCIATION, ROCKFORD, ILLINOIS

Amcore Bank, National Association, Rockford, Illinois, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Harris National Association, Chicago, Illinois, to assume all of the deposits of Amcore Bank, National Association.

The 58 branches of Amcore Bank, National Association will reopen on Saturday as branches of Harris National Association. Depositors of Amcore Bank, National Association will automatically become depositors of Harris National Association. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Customers should continue to use their existing branch until they receive notice from Harris National Association that it has completed systems changes to allow other Harris National Association branches to process their accounts as well.

This evening and over the weekend, depositors of Amcore Bank, National Association can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of December 31, 2009, Amcore Bank, National Association had approximately $3.8 billion in total assets and $3.4 billion in total deposits.

Harris National Association will pay the FDIC a premium of 0.01 percent to assume all of the deposits of Amcore Bank, National Association.  In addition to assuming all of the deposits of the failed bank, Harris National Association agreed to purchase essentially all of the assets.

Tyvek Towers is what Algonquin residents call this failed condo project financed by Amcore. Personally, I like the white reflecting in the Fox River. If I read the FDIC press release correctly, that Federal agency will assume 80% of the loss.

The FDIC and Harris National Association entered into a loss-share transaction on $2.0 billion of Amcore Bank, National Association’s assets. Harris National Association will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit:  http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-800-591-2767. The phone number will be operational this evening until 9:00 p.m., Central Daylight Time (CDT); on Saturday from 9:00 a.m. to 6:00 p.m., CDT; on Sunday from noon to 6:00 p.m., CDT; and thereafter from 8:00 a.m. to 8:00 p.m., CDT.  Interested parties also can visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/amcore.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $220.3 million. Harris National Association’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. Amcore Bank, National Association is the 51st FDIC-insured institution to fail in the nation this year, and the fourth in Illinois.

Crystal Lake's Amcore Bank branch as seen from Rt. 14.

The last FDIC-insured institution closed in the state was Bank of Illinois, Normal, on March 3, 2010.

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Harris already has a branch on Route 14, so consolidation seems to be in the cards.  In my opinion, Amcore’s Pingree Road location is the better of the two.

The Chicago Tribune reported serious problems at Amcore in March.

Thursday, Crain’s Chicago Business also alerted readers to Amcore’s imminent demise.

That’s what Crain’s Chicago Business is reporting in an online article entitled,

Harris is bidding on teetering Amcore Bank

The most visible McHenry County indication of poor banking practices by Amcore Bank is the abandoned condo project at the intersection of Routes 31 and 62.

Amcore’s most visible local failure is what folks call the Tyvek Towers in Downtown Algonquin.

My biggest concern is whether I’ll be able to continue paying our mortgage at the Crystal Lake branch.

Amcore bought the First National Bank in Woodstock and later opened a branch in Crystal Lake on Pingree Road and Route 14 before anything was out there but the Switzer Boat building. A branch opened in Huntley on Route 47 was later closed. Another in McHenry on Route 31 remains open.

Broadway Bank in Chicago is among the others who may be a name change Friday night.

Back when I state representative in the 1990′s I suggested that Algonquin could improve the quality of life of pretty much everyone driving east on Algonquin Road across Route 31 by creating a park where the failed condominium project now sits.  Back then state money might even have been available.

People driving down the hill could see the river on their way to work.

Water has a calming effect on almost everyone. I think that’s why waterfront property is so valued.

Riverside Square will come tumbling down, if the Algonquin Village Board gets its way.

Now that the Village of Algonquin has announced that it will seek to demolish Riverside Square, the village board has another chance to turn it into a park.

Village President John Schmidt said,

““This structure has sat vacant and unfinished, with no siding and no fire protection, for over a year and a half. This building is an eyesore, a fire hazard, and an attractive nuisance, but what is worse, it has deteriorated and continues to deteriorate.

“The Village is afraid that it will rapidly become a worse hazard than it already is.”

Maybe AMCORE Bank will just walk away from the project and trade the land for demolition costs.

However it is paid for, I hope area residents will end up with open space there through which eastbound drivers can see the Fox River.

The village issued the following press release March 17th:

Village to Petition Court for Demolition of Riverside Square

Algonquin – At its March 16 Board Meeting, the Village Board of the Village of Algonquin approved a motion authorizing the Village Attorney to file suit against the owner, Amcore Bank, any and all lien holders and other interested persons, asking the court to order demolition of the half-finished structure at the intersection of Illinois Routes 31 and 62.

The basis of the suit lies in the outstanding code violations that exist at the half-finished structure. Village Board President John Schmitt said, “This structure has sat vacant and unfinished, with no siding and no fire protection, for over a year and a half. This building is an eyesore, a fire hazard, and an attractive nuisance, but what is worse, it has deteriorated and continues to deteriorate. The Village is afraid that it will rapidly become a worse hazard than it already is.”

The project was originally approved in November 2006. In October 2008, Amcore Bank halted payouts on the construction loan, and the developer filed for bankruptcy shortly thereafter. In May 2009, Amcore took title to the property in lieu of foreclosure.

Village leaders have given Amcore Bank ample opportunity to repair the structure and have taken subsequent enforcement action on the building. Building Commissioner Craig Arps said,

“The Village initially told Amcore to complete the roof, the windows, and the exterior brick by December 2009. In November 2009, Amcore informed us that they had chosen not to complete the brick on the outside of the structure.”

With incomplete siding, water is entering the building, causing mold and rot which can rapidly weaken the wooden structure of the building and may cause the existing brick and mortar to fail.

In January, the Village charged Amcore with multiple ongoing property maintenance and building code violations, with daily fines of up to one thousand dollars for each violation.

“Obviously the threat of large fines is not working,” said Arps, “the building is just sitting there, half finished and exposed to the weather.”

“It’s unfortunate that we have to pursue this avenue,” said Schmitt. “We’ve tried working with Amcore Bank, and they have consistently refused to complete the exterior of the building.”

Real trouble, according to the Chicago Tribune this morning.

Riverside Square, AMCORE's white elephant on the corner of Routes 31 and 62.

The most visible indication of the problem is at the northeast corner of Routes 31 and 62.

The unfinished condo building seen from the east side of the Fox River.

I’m told Riverside Square is supposed to be finished in brick, but from across the river, white looks fine. Its image reflects from the Fox River when it isn’t frozen.

AMCORE is a Rockford-based bank that has bought up a number of community banks in McHenry County, including the First National Bank of Woodstock, where I started banking thirty-some years ago.

It was heavily invested in real estate and, when the bubble burst, it financial stability started leaking as well.

Several people I know have been laid off as a result of its downturn in fortunes.

When Crystal Lake Kiwanis Club member and Crystal Lake Public Library Board President Carol Heisler said that the Crystal Lake Library’s remodeling project had come in “on time and under budget,” it caught my attention.

How often does that happen when government in any public construction project?

In this case, Heisler attributed it to hiring construction management firm Featherstone, out of Elgin.

Generally coming in within 5% of a tax district’s budget is considered good enough.

At least, that’s what the Huntley School District 158’s forensic auditor Mike Nowark told its school board.

Heisler, manager of the Crystal Lake branch of Amcore Bank, said there was even enough money left over to fix problems in the parking lot.

To see what had been accomplished in such a project, I decided to go over and take some pictures.

It wasn’t the grand opening, which will be held Sunday afternoon at 1:30. Fancy speeches by legislators, probably the mayor and other notables.

And, “behind-the-scenes” tours beginning at 2.

The public (or maybe it is seniors, now that I look at the bottom of the announcement) is also invited for a guided tour on Thursday, May 10th, from 10-1.

How was the renovation financed?

• $300,000 came from donations and bequests.
• $1 million came from a loan from the Home State Bank, which banker Heisler said was at “a really good rate.”
• $1.1 million was taken out of operating funds set aside for facility improvements and equipment upgrades.

Naturally, the bank loan will be repaid from future budgets. The library will be debt-free in 8 years.

The idea for remodeling apparently is a result of Crystal Lake voters rejecting a referendum to build a new library in 2004.

The idea for remodeling apparently is a result of Crystal Lake voters rejecting a referendum to build a new library in 2004. The vote was 4,611 “yes,” 12,459 “no,” almost a 3 to 1 margin.

The plan was developed with advice from a Citizen’s Library Advisory Committee and a Public Opinion Survey, according to to Bobbi Pierce, the library’s Community Relations Coordinator.

The massive re-arrangement of space left the meeting room with 235 fewer square feet and adult services with 3,730 less space.

But, there are 1,500 more linear feet of shelving.

That’s an increase of over 9%.

And there’s a lot more space for the young folks of our community.

There used to be 5,234 square feet.
Now there is 7,526 square feet.

That an increase of a whooping 44%!

And, there’s a new computer lab.

It is designed so that anyone can see the screens of users through glass windows, although the carrels are smaller.

When I walked some of the stacks, I have to say I was reminded of the library at the University of Michigan, where I got my master’s degree in public administration.

The aisles were narrow and the shelves high.

The main difference was that the Crystal Lake Public Library has carpeting, rather than linoleum.

The result is that it is a lot quieter than the University of Michigan’s library.

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The adult stacks shown in the top picture run the entire length of the western wall of the library.

The entrance display shown explains where the money for the renovation is coming from.

The downstairs shot of the children’s part of the library was taken from behind a friendly computer named “Francine.”

The next photograph is of the new computer area.

Finally, two men from Sherman Mechanical were doing some last minute adjustments to wiring above the ceiling next to the parking lot entrance.