The charges relate to the bank’s administration of Small Business Administration loans
The Federal Deposit Insurance Corp. has accused Warwick resident Robert Catanzaro, CEO of East Greenwich-based Independence Bank, of defrauding the U.S. government through the Small Business Administration loan program at a cost of $8.8 million, along with former bank vice president Danielle Desrosiers of Warwick, and business owner John Ponte, formerly of East Greenwich who now lives in West Warwick.
According to the complaint, dated Feb. 10, 2023, Ponte brought customers to Independence Bank for SBA loans and “Catanzaro caused the bank to enter into a high-risk non-diversified SBA lending strategy.”
The complaint said the bank’s profitability was closely linked to the SBA loans referred by Ponte and his company, Ponte Investments (known today as Greenwich Business Capital), noting that approximately 76 percent of the dollar amount of SBA loans funded by Independence Bank were from Ponte referrals.
The FDIC called Catanzaro’s risk management practices “deficient” and said they provided “inadequate” oversight over Ponte, despite repeated notifications of deficiencies by the SBA.
Another part of the scheme, according to the FDIC, had to do with highly profitable but also highly risky bridge loans offered to SBA loan applicants while they awaited approval and funding by the bank. The interest rate on many of these bridge loans was 50 percent to 100 percent; the FDIC said Ponte arranged, where possible, to have the bridge loans repaid from the proceeds of the SBA loans made by Independence Bank. The federal agency also accused Ponte of concealing information about the bridge loans from the bank’s underwriters and the SBA.
According to the FDIC:
Through the Bridge Loan Scheme, Respondent Ponte targeted struggling small businesses by purporting to offer financial relief. Typically, only businesses in weak financial condition agreed to take on Bridge Loans offered by Respondent Ponte and Ponte Investments. Nevertheless, Bridge Loans were highly lucrative for Respondent Ponte and Ponte Investments because, for loans approved by the SBA, Respondent Ponte shifted the risk of the Bridge Loans to the Bank and the SBA by having Bridge Loans repaid from SBA loan proceeds.
The agency accused Catanzaro and Desrosiers of participating in the bridge loan scheme and said Catanzaro was aware of the scheme and worked with Ponte to ensure that bridge loans were not documented in the bank’s records.
According to the complaint, approximately 44 percent of the 201 SBA loans defaulted (a total of 89 loans), leading to the bank charging-off approximately $1.6 million – “the SBA found this default rate to be five times higher than the bank’s peer institutions.”
The agency accused Desrosiers of working for both the bank and Ponte during in 2017-18. She left the bank in 2018.
Catanzaro faces $400,000 in fines from the FDIC; Desrosiers is facing $128,000 in fines; and Ponte faces $74,000 in fines.
Catanzaro, the bank’s primary shareholder, originally operated a private investment firm, founded in 1995. He transitioned it into an FDIC-insured bank in 2003 and it has been headquartered at 1370 South County Trail since then.
Heather Marshall, spokesperson for the bank, said Thursday the bank was not a party of the FDIC allegations. She also said, “CEO Catanzaro denies that he engaged in any prohibited conduct and will vigorously defend himself against the FDIC allegations.”
Ponte and Desrosiers have also denied the allegations.
Find the full FDIC complaint here: Administrative Complaint.