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Pride and a Fall: Naples Banker Jerry J. Williams

On Nov. 30, 2006, Naples banker Jerry J. Williams walked into a gala at the Pierre Hotel in New York at the pinnacle of his career. At 46, he was leading Orion Bank, the second-largest Florida-based bank and the source of his substantial wealth. He had a private plane, a seven golf handicap and a devoted family. He had served as chairman of the Florida Bankers Association and as a director of the Federal Home Loan Bank in Atlanta, soon to become vice chair.

Williams' Orion Bank wasn't just doing well — it was the top-performing bank in Florida. In two years, it had doubled assets while earning fat profits. In recognition, Williams was at the Pierre to accept a Community Banker of the Year for Performance honor from the American Banker trade publication. In his acceptance, American Banker reported, Williams "struck a patriotic note, calling it a privilege to live in a country that 'provides the freedoms and the opportunity to pursue dreams.' "

Williams lived the dream. He liked to recall a childhood in small-town Texas of Friday night lights and Sunday church, days sweeping the floor of his dad's hardware store and delivering the local paper. At 27, at the behest of investors he knew through a banking job he had in Ohio, Williams had moved to the Florida Keys to run what became Orion.

In 1994, he moved to Naples to give the bank wider opportunity. He focused Orion on construction and development loans for single-family home developments. He spoke often of closely monitoring loan quality. Indeed, by the time American Banker honored him, Orion hadn't charged off a loan for 15 years. Orion was charitable and its employees were active in the community.

Williams led by example — whether with the local chamber or by showing up with a chainsaw at employees' homes to help them clean up after a hurricane. Top aides spoke of Orion's generous benefits and pay. He once gave a car to a career receptionist. He was likable. "He oozes charisma. A few moments in his presence, and you feel like an old friend he golfs with every weekend," wrote a local newspaper.

That was one side of him. "He had people on the outside fooled," says Patrick Miller, a former Orion senior vice president. "He was probably the most dictatorial person I ever worked with in my entire life." Miller says Williams would tell bank employees "a monkey could do your job" and "I am the board." He was right about the latter. No outside Orion director had banking experience, and Williams, who owned 24% of the bank, ran the show, regulators say.

In the year after the Pierre Hotel gala, as real estate collapsed and took Orion's loan portfolio with it, Williams' domination of the bank and the board's lack of oversight began coming home to roost. Orion's 2007 safety and soundness rating from regulators was poor. In early 2008, they warned that the bank was in trouble and needed to build reserves and capital.

Williams ignored them, regulators say. The government maintains that Williams could have raised money for the bank, but selling shares at their value at the time would have diluted his holdings and triggered default provisions in loans he had secured with Orion stock. Miller agrees: "We could have survived, but he wouldn't have been the top dog. He did not want to dilute his ownership, in my opinion."

Williams remained confident. In late 2007, he told Florida Trend he would add six branches to the bank's 21 in 2008. "There's still some rough weather ahead," he said of the economic outlook. He urged borrowers to come early to lenders with their troubles. "The sooner they communicate with their bank and their bankers, the easier it will be. A lot of the people look like deer in the headlights now. They don't know what to do," Williams said.

He could have been referring to himself. Belatedly, Williams saw the danger and then took what his lawyers would argue were measures not to enrich himself but to save Orion from the recession. The record detailed by the government suggests a more selfish motive.

Williams' finances were as precarious as Orion's. As the recession loomed, all but $858,000 of his $127 million net worth was in Orion stock. He was $15 million in debt and had $750,000 in annual debt service. He kept up thanks to a $575,000 salary and $300,000 to $400,000 in quarterly dividends. As the bank's outlook worsened and its need for cash grew, Williams used its dwindling cash to pay a large dividend to its 800 shareholders, with himself the largest shareholder of all.

When regulators put a halt to dividends, Williams looked elsewhere for cash. In April 2008, he had the company employee stock option 401(k) plan borrow money to buy $1 million of his shares. He used much of the proceeds to pay his taxes and the rest to buy a boat and bulk up his account at Bank of America. At roughly the same time, the 401(k) plan was withholding cash from other employees. The bank told them the plan was short of cash.

By 2009, Williams' net worth was down to $78 million, all but $65,000 of it in bank stock. In June 2009, three friends, including former Miami Dolphins head coach Dave Wannstedt, bought $765,600 in Orion shares. In his sales pitch, Williams spoke of an elderly investor with health issues who needed to cash out. In fact, Williams sold them his own shares. At roughly the same time, he hit on the illegal idea of raising capital for the bank by lending bank money to borrowers and convincing them to invest it in the bank. He duped one developer into believing it was legal; the bank boosted a loan to the developer by $7 million so that he could invest $10 million in the bank.

That same month, Williams executed his most complex and egregious maneuver. In essence, Williams ran roughshod over lending policies to hide bad loans, make the bank appear to have new capital and fool regulators into thinking it was sound. The vehicle was a borrower Williams recruited — Francesco Mileto, a self-described heir to an Italian fortune, to whom Orion would lend money.

Before the deal closed, it became apparent to Williams and other bank officers that Mileto was a fraud. A lawyer in Italy that the bank hired to check on Mileto tried to warn Orion. But in June 2009 Williams pushed through an $82-million loan to Mileto — through companies serving as fronts for Mileto — with the understanding that Mileto would invest $15 million in Orion to recapitalize it. Between that $15 million and the $10 million from the duped developer, Williams was able to email regulators on July 2, 2009, "We raised the $25 million from private individuals and without any financing."

In fact, "he was lending money to buy capital, which is totally illegal," says Miami banking analyst Ken Thomas.

Efforts to obtain comment from Williams weren't successful. But his lawyers later would say that the illegality was an anomaly in an otherwise exemplary career. "When Orion Bank was faltering amidst unprecedented economic conditions, Jerry Williams did everything he could to try to save it," they wrote.

Once regulators discovered the fraud later in 2009, they ordered Williams out of his job. The bank failed in days, costing the FDIC $884 million. Williams' lawyers said the Mileto deal didn't cause the failure and emphasized that Williams didn't get a penny from the transaction.

Mileto drew a 5½-year sentence, and two other bank executives received two-year and 2½-year sentences. Williams eventually pleaded guilty to conspiracy to commit fraud and making false statements to regulators.

"The failure of Orion Bank was more than just a calamity caused by an economic downturn. It was fraud at the highest level of bank management," a federal prosecutor, Nicole H. Waid, wrote a judge. "He ignored regulators' warnings, fought examiners at every turn, refused to listen to employees and turned to criminal activity when he finally acknowledged the seriousness of Orion's deteriorating financial condition." Said Waid in an interview, "Mr. Williams was trying to help himself rather than the bank." She says the government hopes the case will deter others by showing "the government is not going to ignore lying to regulators."

Employee stockholders were wiped out. Miller, for example, invested $200,000 over the years in stock and spent another $250,000 on options. He said Williams pressured employees to keep their plan money in Orion stock. At one point, Miller's shares were worth $3 million. Now, says Miller, 59, they're worthless. Miller was chosen to represent employees at Williams' sentencing. He asked the judge to come down hard on Williams. "His quest to become powerful in the world of banking was shadowed by his increased selfishness and greed. He simply lost his moral compass," Miller told the judge.

Williams' lawyers wrote the judge: "The Bank failed, despite the best legitimate efforts of Mr. Williams and all of its employees, due to the overwhelming economic circumstances of the times. Individuals' personal anger toward Mr. Williams is, perhaps, understandable but, respectfully, misplaced."

Williams' net worth earlier this year stood at negative $3.5 million. In August, nearly six years after walking into the gala at the Pierre, Williams walked into the minimum-security prison camp at Maxwell Air Force Base in Montgomery, Ala., to serve a six-year sentence, earning himself the distinction of being the highest-ranking Florida banker to go to prison since the financial crisis began in 2008.