Former New Frontier loan officer charged with fraud

GREELEY — Former New Frontier chief loan officer Gregory William Bell has been charged with four counts of fraud related to his activities at the bank, entering guilty pleas this week that could result in decades behind bars.

Bell entered his guilty pleas during a brief appearance in U.S. District Court in Denver on Wednesday after prosecutors alleged he made false bank entries, misapplied funds, committed bank fraud and engaged in money laundering.

The charges cover actions committed by Bell in the four years leading up to New Frontier’s failure in 2009. In 2010, Bell and several other of the bank’s officials, including Larry Seastrom, Robert Brunner, Timothy Thissen, John Kammeier and Jack Renfroe, were banned from banking.

The Federal Insurance Deposit Corp. ordered a criminal investigation into all of the officials, but Bell is the only one who is known to have been charged thus far.

Bell’s next court date has not yet been set.

The first count against him alleges that in October 2005, Bell submitted false information on a $5.58 million loan to two borrowers.

Bell “failed to disclose that a certificate of deposit, the value of which was $106,759, pledged as collateral” belonged to another individual. The documents say Bell would have benefited personally from the loan.

The second count accuses Bell of misapplying more than $662,000 of New Frontier’s money in March 2008.

The third count alleges that from June to September 2008, Bell “devised and participated in a scheme to defraud (New Frontier).”

As a part of this scheme, Bell is accused of arranging for eight New Frontier customers to borrow money from the bank and using the proceeds of those loans to purchase shares of stock in New Frontier Bancorp.

At the time, the bank was under supervision from regulators who had instructed the bank to raise its capital reserves. The purchase of shares is one way banks raise money in this situation.

In order to accomplish this, the documents state, Bell prepared the loan documents but only vaguely stated the use of the loan proceeds.

Bell claimed in the documents that the proceeds would be used for “business investments, business investments to manage proceeds of $4.2 million (in) water sales, and new money for the purchase of agriculture real estate, operating line of credit for farm and business investment to manage income from pending oil and gas lease.”

In total, the charging documents allege that Bell caused New Frontier to loan more than $20 million to unnamed borrowers. Following that, these same borrowers used more than $4 million in proceeds from the loan to purchase shares of stock in the bank’s holding company.

In August 2008, according to the court documents, Bell attempted to deposit some $260,000 in proceeds from one of the loans into an account of one of the borrowers.

The fourth count against him alleges that Bell attempted to deposit $160,000 of “proceeds of an unlawful specified activity,” into his own bank account in June 2008. He also attempted to disguise the source of the money, according to the documents.

Bell’s attorney, Saskia Jordan of the Denver firm Haddon, Morgan and Foreman, could not be immediately reached.

The first three counts carry possible sentences of up to 30 years in prison and a fine up to $1 million per count. The fourth count carries a possible sentence up to 20 years in prison and a fine as large as $500,000.

New Frontier Bank was founded in Greeley in 1998 and grew into the largest agricultural lender in the region. By the end of 2008, it was a massive force in the Northern Colorado banking world, with more than $2 billion in deposits.

In April 2009, the bank was taken into receivership by the FDIC after losing more than $11 million in the first quarter of that year. Its doors closed forever in May 2009, but fallout from the bank’s demise was felt long afterward.
Despite its high loan and deposit numbers, New Frontier was already in trouble in late 2008. Like many other banks at the time, it was facing increased regulatory scrutiny on a number of issues, including not maintaining adequate levels of capital or reserves for loan losses.

In December of 2008, New Frontier entered into a cease-and-desist agreement with the FDIC to correct a variety of “unsafe or unsound banking practices and violations of law and/or regulations.”

The cease-and-desist order came on the same day New Frontier and Boulder-based investment group Colorado Financial Holdings reached an agreement for CFH to invest at least $30 million in the institution.

In January 2009, one of the bank’s biggest customers, Eaton-based Johnson’s Dairy, filed for bankruptcy, then filed a complaint against New Frontier executives.

The complaint alleged that the defendants were involved in a scheme that allowed the bank to continue lending to the dairy beyond legal lending limits.

Following this, CFH withdrew its interest in the bank. In April 2009, then-president and founder Seastrom was removed from the bank and replaced by an FDIC administrator.

Throughout the rest of 2009, FDIC regulators continued to divest New Frontier’s assets, including real estate holdings and loans, with some going for pennies on the dollar.

By November 2009, the FDIC released a report stating that New Frontier failed because of inadequate risk management practices related to rapid growth, questionable loans and a heavy reliance on brokered deposits rather than local deposits.

“In retrospect, a stronger supervisory response at earlier (bank) examinations may have been prudent in light of the extent and nature of the risks and the institution’s lack of adequate or timely corrective action,” the report said. “Stronger supervisory action may have influenced New Frontier’s board and management to constrain their excessive risk-taking during the institution’s rapid growth period.”

The following month, in December 2009, nearly 60 former shareholders of the bank filed suit, naming nine defendants, Bell among them. The shareholders, who had collectively invested about $13 million in the bank over its 11-year history, lost the value of their shares when the bank failed.

The suit alleged that the defendants permitted and encouraged policies and practices that led to the bank’s failure by, among other things, making too many loans and permitting — sometimes participating in — transactions meant to circumvent lending limits.

The case was dismissed without prejudice in March 2010.

The final estimated loss from the New Frontier failure to the FDIC insurance fund was $871.4 million, one of the costliest in the nation’s history.

CLICK here to read the documents outlining the charges against Bell.

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Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, or

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