An Iowa banking executive accused of attempting to defraud the Small Business Administration has been sentenced to nine months in prison and ordered to pay $4.5 million in restitution.

Larry Charles Henson of Davenport is the former chairman and president of the now closed Valley Bank in Moline, Illinois. He was accused of conspiring with others to transfer millions of dollars in potential losses from Valley Bank to the SBA.

Henson was sentenced by U.S. District Court Judge Stephanie M. Rose on Tuesday to nine months in Federal Medical Center in Rochester, Minn., a federal prison for male inmates requiring specialized or long-term medical care. duration.

After serving his prison sentence, Henson will then serve a five-year sentence of supervised release. Rose also ordered Henson to pay restitution in the amount of $4,528,191.

Prior to sentencing, prosecutors had argued for some form of incarceration, saying it “would deter comparable activity by sending the message that such behavior is unacceptable and will be judged harshly in the Southern District of Iowa… The exploitation of federal programs for financial gain cannot be tolerated in our society.

One of the letters of support for Henson that was filed with the court is from the Reverend Jeffrey S. Meyer of Madison, Wisconsin. In his letter, Meyer said Henson indicated he was at risk of dying in prison due to heart disease. Meyer asked Rose to impose a sentence that would allow Henson to “return to his family without too much time served so that he can continue to provide the leadership he has been for his family and his community.”

Court records indicate that Henson conspired with Michael Barry Slater of Des Moines, the founder and president of Vital Financial Services, a Clive-based loan services provider, to defraud the SBA. Slater pleaded guilty to a charge of conspiracy to commit wire fraud and his sentencing is scheduled for March 15.

Prosecutors say Slater worked with Henson and other Valley Bank employees to design loans so it appeared borrowers qualified for SBA guarantees. They did so by allegedly filing loan guarantee applications containing false statements regarding both the borrowers’ eligibility to receive the loans and the eventual disbursement of the loan proceeds.

For example, in September 2011, Valley Bank reportedly attempted to shed all risk associated with a $5 million loan it made to a Kentucky-based company that was heavily indebted and had limited capital.

Slater reportedly advised Henson to “do everything possible to ensure that the borrower is not more than 29 days behind” in payments to ensure his application for the refinance of the SBA-backed loan would be approved. – even if it meant having Valley Bank grant the borrower a 90-day payment deferral.

Slater also allegedly called Henson and suggested various ways a bank could fraudulently conceal from the SBA the fact that a loan was at risk of default.

Shortly after, Slater called Valley Bank Vice President Andrew Erpelding to warn him that the loan could not be refinanced by the SBA due to previous arrears. Erpelding allegedly called Henson and told him of the problem, after which the two men jointly called Valley Bank Vice President Susan McLaughlin, asking her to change the bank’s loan repayment reports.

McLaughlin reportedly complied, amending the borrower’s payment history to eliminate any overdue payments. The bank, along with Slater, then forwarded the falsified information to the SBA as part of the refinance request.

Similar conduct was alleged with respect to Valley Bank’s loans to two separate Florida companies, one of which involved a $4.6 million refinance. The other involved a $5 million loan that defaulted, resulting in $3.4 million in losses for the SBA.

Erpelding was charged in October with conspiracy to commit wire fraud. His sentencing is scheduled for April 19. McLaughlin was also charged with wire fraud. Despite a Nov. 12 order unsealing the case, all documents in the case remain inaccessible to the public, but it appears McLaughlin is scheduled to be sentenced on April 5.