POSTED: 5:27 pm EDT October 29, 2010

http://www.wcyb.com/news/25569236/detail.html

The former head of the New Peoples Bank (NPB) pled guilty today to charges related to a conspiracy to commit insider trading and money laundering offenses during his tenure as president and chief executive officer of the financial institution.

Kenneth D. Hart, 63, of Honaker, Virginia, waived his right to indictment and pled guilty this morning to an Information charging him with one count of conspiracy to defraud the United States and one count of money laundering.

“When people invest in financial institutions, they rely upon the integrity of the individuals who run those institutions,” United States Attorney Timothy J. Heaphy said today. “Instead of protecting the assets of the customers of New People’s Bank, Mr. Hart used inside information to line his own pockets. This case is a prime example of why we must vigorously enforce the laws against insider trading. It demonstrates our commitment to protect our financial system against those whose greed and self-dealing violate the trust of others.”

Hart, along with several family members and friends, formed NPB on October 29, 1998.

Since its inception, the defendant has served as the president and CEO of the bank. Under his leadership, NPB provided training to his bank officers and board members regarding insider trading. Officers, directors and employees were prohibited from trading in the company’s stock while in possession of material, non-public information about NPB.

In addition, the bank would announce blackout periods during which officers and board members, as well as friends and family members, were prohibited from trading.

Today in U.S. District Court, Hart admitted that he, and others, engaged in insider trading in order to enrich themselves. Specifically, on July 10, 2008, a bank customer contacted an NPB branch manager in West Virginia to express his interest in acquiring 500,000 shares of stock.

The customer said he was willing to pay $12 per share for a total investment of $6,000,000. The branch manager contacted the Abingdon, Virginia branch of NPB and ultimately Hart was notified of the customer’s proposal.

Hart admitted that over the next month or so, he, and others, used this insider information to aid and assist family members and friends in obtaining $12 per share for their shares of NPB stock.

The NPB board of directors was never advised of the proposed acquisition of a large block of NPB stock.

In order to facilitate the scheme, Hart directed a not named co-conspirator to open a checking account under the name F.D. Owens, Jr. Investment Account. Three deposits were made into that account totaling $6,600,000. The source of these funds were cashiers checks remitted by the bank customer and for the purpose of purchasing NPB stock. Checks were then written out of the F.D. Owens account to pay friends and family members of the defendant for their sold stock.

Hart left the bank in May 2009.

At sentencing, the defendant faces a maximum penalty of five years in prison on the conspiracy charge and a potential maximum sentence of 20 years in prison on the money laundering charge.

The investigation of the case was conducted by the Bristol, Virginia Office of Internal Revenue Service Criminal Investigation and the Federal Bureau of Investigation.

Assistant United States Attorney C. Patrick Hogeboom III is prosecuting the case for the United States.