Murky motive adds intrigue to Old National loan saga

In the buttoned-down world of banking, it doesn't get much stranger than this: An Indianapolis loan officer with a strong reputation is suddenly dismissed after his employer charges he falsified lending documents.

The bank says the fraud exposes it to potential losses approaching $20 million. And here's the kicker: The employer hasn't accused the banker of committing the wrongdoing for personal gain. There are no allegations, for instance, of setting up fictitious borrowers to scoop up bank cash on his behalf.

Yet this is where we find ourselves with Old National Bancorp. It announced in April that it fired a veteran Indianapolis commercial lender after uncovering misconduct—a discovery that touched off an internal investigation the bank hopes to wrap up next month.

Evansville-based Old National has never publicly named the loan officer, but IBJ confirmed it's Rob Tolle, a veteran Indianapolis banker in his late 30s or early 40s who jumped from Regions Bank to Old National several years ago.

Businesspeople who dealt with Tolle over the years describe him as a consummate professional who seemed on top of his job.

But the bank casts him as a rogue employee who acted alone.

"It's unfortunate in our business that when people want to commit fraud, they have the ability to figure out how to do it," Old National CEO Bob Jones said in an April 7 conference call with analysts.

Getting at the truth

Tolle's defense attorney, Robert Hammerle, wouldn't comment in detail but hinted that he doesn't think the case is as black and white as Old National suggests.

"From the beginning, we have attempted to sit down with Old National to try to answer all their questions," Hammerle said.

"My purpose in being involved is to try to get at the truth of what happened. What I will not allow to happen is to make Mr. Tolle a scapegoat for internal problems they have."

Old National said it discovered the problem in the middle of the first quarter, when the deterioration of several of the lender's loans caused the bank to begin scrutinizing his portfolio.

Bank officials say they initially unearthed a forged inspection report. They then found other misconduct, such as faked signatures, that hindered Old National's ability to seize collateral in the event loans soured.

For example, on one large loan Old National had required the personal guarantees of the borrower's three principals—one of whose signatures it found had been forged.

In another case, Old National thought it had access to cash collateral but found the borrower's pledge of those accounts was forged.

Such problems might have gone unnoticed in boom times, when many companies were awash in cash. But the economy has been sputtering for months, straining some borrowers' ability to make payments on time. Making matters worse, some of the loans were secured by real estate that has declined in value.

The bank in the first half of the year charged off $13.9 million related to what it calls "the fraud-related incident." It has another $4.6 million set aside as reserves for other potential losses.

Old National said in April that it had contacted the FBI. It said it is pursuing all its options, including civil and criminal charges, and attempting to recover losses from its insurance carrier.

'Incredibly unfortunate'

"It's an incredibly unfortunate situation for ONB and for the lender's family," said Jeff K. Davis, an analyst with FTN Midwest in Nashville, Tenn.

Indianapolis bankers are perplexed, saying they don't see what motive Tolle would have to put himself in legal peril.

Successful commercial loan officers can earn more than $175,000 in salary and bonuses. But they don't have a direct financial stake in closing a loan, since commission-based compensation might encourage reckless lending.

Bankers with no direct knowledge speculate Tolle took shortcuts for expediency or to make his portfolio appear in order for regulators or his supervisors. They also say he could have been trying to close a certain number of loans to meet performance goals.

None of the chatter does any favors for Tolle, whose reputation has taken a drubbing, even though he hasn't been charged with any crime.

"The real tragedy for a lawyer dealing with a case like this is to have a guy like Rob Tolle who has had a sterling reputation in the banking world who has been inferentially linked with suggestions of something improper," Hammerle said.

"It doesn't matter whether those suggestions are accurate or not. Once you are stained with those in the public eye, it is almost impossible to wash them away."