FBI, SEC probe Wilmington Trust

Investigations allegedly involve fraud related to real estate loans

Once-venerable Wilmington Trust, a more-than-century-old banking institution taken down by bad real estate loans, is now the subject of an FBI criminal probe, and a federal grand jury has been impaneled to hear evidence, people close to the investigation say.

The U.S. Securities and Exchange Commission in New York also is pushing forward with its own investigation.

Wilmington Trust was swallowed up earlier this year by M&T Bank Corp. of Buffalo, N.Y., at a fire-sale price after an 11th-hour takeover deal was announced in November 2010.

The Delaware bank company's third-quarter financial information was so alarming that its businesses faced the possibility of "significant regulatory actions," the company said in its proxy statement. The announced sale price per share was about half the share price on the previous trading day. The sale resulted in shareholders' losing millions of dollars, including many small Delaware investors who had held on to thousands of shares of Wilmington Trust stock.

Michael Zabel, spokesman for M&T, said the bank is aware of the ongoing SEC matter. "It's regarding a matter that predated M&T involvement," Zabel said.

As for an FBI investigation and grand jury, Zabel said those proceedings are "typically private."

"I don't have any official information," he said.

U.S. Attorney Charles M. Oberly III declined to comment Tuesday. Judith Burns, a spokeswoman for the SEC, also declined comment, saying all investigations are private.

But people familiar with the FBI investigation said it involves fraud related to real estate loans in Delaware.

Earlier this year, unhappy shareholders filed a securities class-action lawsuit in federal court in Wilmington, alleging a massive securities fraud perpetrated by "one little clan" of top executives who "took the company to the race track" while hiding behind the bank's reputation for stability and safety. According to the civil lawsuit, the problems rested mostly with former Chairman Ted Cecala, former President Robert V.A. Harra Jr., former Chief Financial Officer David Gibson and former Chief Credit Officer William North.

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