More witnesses testified Tuesday about the loans obtained by former Birmingham mayor Richard Arrington Jr. and said Donald Watkins never made any bank official aware of the arrangement.
The CEO of Alamerica Bank Larry Tate finished his testimony first, and was followed by former Watkins attorney Kimberly Perkins and Alamerica Bank board member Mike Weaver.
Assistant U.S. Attorneys for the Northern District of Alabama are still laying out their case against Watkins Sr. and his 46-year-old son, Donald Watkins Jr. Both Watkins Sr., and Watkins Jr. are each charged with seven counts of wire fraud, two counts of bank fraud and one count of conspiracy to commit wire fraud and bank fraud relating to a conspiracy the government claims lasted for nearly a decade. They were indicted in November and the trial is now in its second week.
Watkins Sr., 70, is well-known for representing former HealthSouth CEO Richard Scrushy and former Birmingham Mayor Richard Arrington Jr. Arrington testified in the trial Monday and said he was asked to obtain four loans through Alamerica Bank-- which Watkins Sr. partially owned-- and send the funds to both Watkins men.
Tuesday morning, Tate said the bank’s board would have needed to know the proceeds from the four loans Arrington took out from 2010 to 2012 were actually going to both Watkins men—which Arrington testified to Monday.
The now 84-year-old served for two decades years as Birmingham’s mayor, and said he and Watkins Sr. knew have known each other for more than 20 years. Arrington agreed with Watkins Sr. that the two had a father-son relationship.
Weaver said Tuesday that knowing the loan funds were not actually going to Arrington would have been important for the board to know before approving the $750,000 loan in September 2012.
According to Tate and information from the Federal Reserve, a bank regulation rule called Regulation O. prohibits an executive officer of the bank to borrow more than $100,000 from his or her institution. The rule also states, “An executive officer of a member bank who becomes indebted to any other member bank must, under certain circumstances, report that indebtedness to the board of directors of the bank of which he or she is an officer.”
Watkins Sr. never mentioned getting money from Arrington’s loan, Tate said. He only learned in 2014 that Watkins Sr. received those funds, Tate said.
Tate said Watkins Sr. never asked him to lie, conceal the loan, or hide anything. He also said he visited and extracted documents from the Masada data room, located in the Alamerica Bank building, and never found it difficult to get information from the elder Watkins.
The board wanted to give Arrington the $750,000 loan when the request came before the board for approval, Tate said, because it would expand the bank’s loan portfolio and they could also make a profit.
He said Watkins Jr. was involved in the bank and board, but was never employed by the bank itself. The younger Watkins attended graduate school in banking during the time, but left the board in 2011 when he started working for State Farm Insurance because of possible conflicts of interest.
During his testimony, Weaver said he became a board member for Alamerica Bank in 2007. Like Tate, he wasn’t aware Arrington’s loans were going to Watkins Sr. or Watkins Jr. and neither Watkins man ever disclosed that information to the board. Weaver said it would have been important to know the funds were going to either of Watkins, because it would have impacted his decision and decision making process on whether to approve the loan. On paper, Weaver said the loan looked standard and Arrington was a good candidate because of his credit score and proper collateral.
Sometime after the $750,000 loan was granted in 2012, Weaver said banking regulators deemed the loan to be a Regulation O violation. Alamerica Bank conducted an audit, which Weaver said cost about $35,000.
In March 2015, when Weaver was the board chairman, he wrote a letter to the FDIC and the state banking superintendent stating Alamerica Bank’s audit affirmed regulators’ finding of violations on the Arrington loan. Weaver said the board asked Watkins to step down because of the violations.
Perkins said on the stand she couldn’t recall many of her specific dealings Masada or its affiliate companies, although she was named associate general counsel for two of the businesses. A letter Perkins signed, which was sent to an Alamerica Bank officer after Arrington applied for the $750,000 loan, contained information about NBA star Charles Barkley’s investments with Watkins Sr. and that Arrington had the “exclusive right” to receive money from those payments. The letter says Perkins verified the information as general counsel, but Perkins testified that Watkins Sr. drafted the letter and she signed it.
Perkins said she did no outside verification on the information contained in the letter.
She said under cross examination from Watkins Sr. that she was never asked to lie for the elder Watkins or falsify documents, although prosecutors pointed out the verification line in the letter during later questioning.
Last week, former U.S. Secretary of State Condoleezza Rice testified along with Martin Luther King III and two former NFL players. The wife of a former NBA star turned college coach also testified Monday.
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