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NC Bank Detects Fraud By Former Director

http://66.225.205.104/JR20100924.mp3

A North Carolina bank with ties to several high profile Democrats announced this week it has been the victim of an apparent fraud that will force it to write off a loss of more than $10 million. New Century Bank is based in Dunn, near Fayetteville, and has such well-connected directors on its board as former state senate majority leader Tony Rand and former Transportation Secretary Lyndo Tippett. Yesterday, New Century Bank released a statement saying one of its former directors apparently defrauded it out of millions of dollars over a period of several years. The bank says the matter is under investigation and calls it "disheartening," but does not give the director's name. However, one of New Century's founding directors - Raymond Mulkey Junior - has been accused by a Fayetteville attorney of operating a Ponzi scheme that caused investors to lose millions. Mulkey was found dead at his home last month. Authorities have not indicated a cause death. He left more than 40 million dollars in unpaid debt and only 8 million dollars in assets. Several of Mulkey's businesses are now under investigation. North Carolina Bankers Association Executive Vice President Paul Stock says fraud on this level is rare for the state's community banks, but unlikely to threaten their stability. "But anything's a cause for concern and of course this is such a difficult time for the banking industry that having to deal with additional challenge is certainly no fun," says Stock. Nor does he think the fraud is a sign of weakness in the state's community banking sector. "Look at Bernie Madoff and the types of very large wealthy individuals and large institutional investors that he was able to rip off," says Stock. "If an apparently good customer is really a con man, any bank could lose a lot of money." New Century Bank says it remains well-capitalized, despite the more than $10 million in fraudulent loans it will be forced to write off as a loss. Several other banks where Raymond Mulkey did business also claim to have been defrauded. Four Oaks Bank said in a filing with the SEC it will write off four-million dollars due to apparent fraud by a customer. The Fayetteville Observer reports Four Oaks Bank has also placed a claim in a similar amount against Mulkey's estate.