The Philadelphia Inquirer reported Joseph M. Braas, the former CEO of Equipment Finance Inc., was sentenced Tuesday, September 11, 2012 in Philadelphia to 15 years in federal prison for a wide-ranging fraud that brought down the Bank of Lancaster in 2007.
Braas oversaw a conspiracy to inflate the company's earnings by hiding hundreds of defaulted or dubious loans while fabricating others to cover the deficits. By the time auditors uncovered the scheme, Equipment Finance Inc.'s losses had ballooned to more than $53 million. The fraud toppled the small Lititz, PA-based firm and its parent companies, the Bank of Lancaster County and Sterling Financial Corp.
Parent company Sterling Financial took a $200 million write-off because of the fraud, and spent $20 million alone just to investigate it. To survive, it closed the Bank of Lancaster County, whose charter dated to 1863, and arranged a merger with PNC Financial.
A grand jury indicted Braas and seven others in November 2010. Within three weeks, Braas pleaded guilty to conspiracy and mail fraud and agreed to cooperate against his codefendants. Most of the others have since pleaded guilty and are awaiting sentencing.
U.S. District Court Judge Paul S. Diamond ordered Braas to begin serving his term immediately after his sentencing.