People’s United senior vice president Linda Rhoads and two associates have departed the bank following an audit that uncovered “internal fraud” at its Hauppauge branch, the Commercial Observer is reporting.
Rhoads and her associates, who were not named, came under surveillance this spring for changing the terms of commercial real estate loans, including extension options and interest-only payment periods, without the necessary credit approval from the bank, the news site said, citing two unnamed sources.
“The audit came in and the bank discovered a whole bunch of deals that had closed with several provisions that had never been approved,” the first source said on the condition of anonymity.
The results of the audit showed multiple transactions with more favorable conditions than People’s United had granted, including the terms on a loan to a publicly traded company, according to both people familiar with the matter.
“It was a total shock to everyone,” the second source told CO. “Nobody knew what the hell was going on.”
People’s United Bank, which operates more than 400 branches in the Northeast and Mid-Atlantic regions, is owned by People’s United Financial, a public corporation with more than $37 billion in assets.
“People’s United Bank has communicated any and all matters that require the attention of the Office of the Comptroller of the Currency to that office,” a spokeswoman for the bank said. She declined to comment further.
While no money had been reported missing when all of the outstanding loans were accounted for, the bank offered the three employees the chance to resign before they were terminated, according to CO’s sources. Ms. Rhoads and one of her two associates accepted the offer, while the third employee declined and was fired shortly after, they said.
“Everyone at the bank loved her,” the second source said. “Linda was their golden child.”
Rhoads, who joined People’s United in December 2010, and the other two employees had worked under John Costa, former executive vice president and head of the bank’s New York commercial real estate business. Costa will step down this week and will be replaced by Mark Melchione, a former administrative vice president and commercial real estate group manager at M&T Bank, the CO report said.