Kentucky

Falmouth bank ex-president gets 6½ years for embezzlement

A former Falmouth bank president who admitted to embezzling more than $2.2 million was sentenced Monday to 61/2 years in federal prison.

Donna Wood, 51, of Falmouth transferred money from accounts belonging to United Kentucky Bank in Falmouth into the accounts of her husband and two sons between March 2003 and Jan. 26.

In the process, she stole about 70 percent of shareholders' equity, resulting in a financial loss to 131 bank stockholders, according to a news release from the U.S. Attorney's Office in Covington.

On Oct. 28, the bank was sold to the Bank of Kentucky.

"Mrs. Wood continued her fraud year after year until it snowballed completely out of control and destroyed the bank, harmed the directors and shareholders and left a void in the community which no longer benefits from an independent community bank," Assistant U.S. Attorney Laura Voorhees wrote in a sentencing memorandum.

Wood was ordered Monday to pay full restitution.

She will have to serve at least 85 percent of her prison sentence and will be on supervised release for five years.

She had previously signed an agreement with the Federal Deposit Insurance Corp. The agreement says she will never work in banking again.

Wood was president of United Kentucky Bank for two years. She had previously been a vice president, beginning when the bank opened in 1992.

To commit the crime, Wood created about 94 false monthly bank reconciliation reports that "dramatically overstated the bank's capital and liquidity, leaving the bank's board of directors and auditors unaware of the bank's dire financial state," according to the U.S. Attorney's Office.

For example, as of Dec. 31, 2010, Wood reported that the bank had $2.9 million in cash and balances with other banks, when it had only $550,000, the Kentucky Enquirer reported.

After the embezzlement became public, there was a run on the bank, where 75 percent to 80 percent of Falmouth's businesses kept their accounts, the Enquirer reported.

Earlier this year, a Pendleton Circuit Court judge issued a civil ruling against Wood, her husband and their two sons, Richard and William Wood, on behalf of the shareholders. The family's farm and other assets were auctioned off in June, generating about $423,000, according to the Kentucky Enquirer.

In addition to the federal conviction, Wood faces state charges. Last month, a Pendleton County grand jury indicted Wood on insurance fraud and tax-evasion charges, and it indicted the two sons to whom she allegedly funneled the bank's money.

In that case, Wood is accused of falsifying insurance applications between 2008 and 2010, according to a news release from the state police. She was indicted on three counts of committing fraudulent insurance acts, and of willfully filing or making false tax returns from 2004 to 2010.

Wood's sons, Richard "Tom" Wood, 32, and William Brett Wood, 28, both of Falmouth, also were indicted on one count each of receiving stolen property valued at $10,000 or more, one count each of receiving stolen property valued at $300 or more and seven counts each of willfully filing or making false tax returns from 2004 to 2010.

The Enquirer reported that Wood's sons have been convicted on drug charges, including possession of methamphetamine.

Richard and William Wood also gave people large amounts of money during the period when their mother provided them with stolen money, state police said.

Three people have been indicted in related cases for willfully making or filing false tax returns or willfully failing to make a tax return.

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