SV Bank fraudsters get 8 years in prison

Sean Cutting and Brian Melland, respectively the former chief executive officer and former chief loan officer of Sonoma Valley Bank, have gone from home loans to the big house. Each was sentenced to eight years in prison for fraud that lead to the collapse of the bank in 2010.

The men faced up to 30 years after their December convictions for conspiracy, bank fraud, wire fraud, money laundering, falsifying bank records, lying to bank regulators and other crimes.

Also sentenced Friday was co-defendant David John Lonich, an attorney for Bijan Madjlessi, the real estate developer who, before his death in May of 2014 had been indicted on charges related to the loan scams.

The court sentenced Cutting, 44, of Sonoma, to 100 months in prison; Melland, 45, of Santa Rosa, to 100 months in prison, and Lonich, 59, of Santa Rosa, to 80 months in prison.

“The defendants’ crimes directly caused the failure of a once-beloved community bank resulting in at least $47 million in losses and other staggering consequences,” said Acting U.S. Attorney Alex G. Tse.  “Senior bank executives and the corrupt attorneys who help them must always be held accountable.”

When the bank collapsed, its stock became worthless. The bank was seized by the federal government, which sold its assets to Westamerica Bank.

Cutting and Melling’s scams included bilking taxpayers out of $8.6 million in federal bail-out funds, in the recession-era program known as TARP.

“TARP was intended for healthy banks, not to fill holes in fraud-riddled bank books,” said Special Inspector Christy Romero. “It’s not a cookie jar, but that’s what Cutting called it.”

Cutting, Melland, and Lonich were involved in multiple schemes to defraud numerous financial institutions including Sonoma Valley Bank, its regulators at the FDIC, and what was then called the California Department of Financial Institutions (DFI).  

The two lied about the bank’s health, and the shady loans, during FDIC examinations in May 2008, and again in December 2009.

Finally exposed were s years of excessive and illegal lending, often using “straw” or nominee borrowers, to Madjlessi for real estate projects in Santa Rosa and Petaluma. 

The sentencing, said FDIC Inspector General Lernersaid “holds senior bank executives and an attorney accountable for their years of deception to orchestrate multi-million-dollar fraud and for their abuse of positions of trust.”