Federal Judge Orders $450,000 Restitution for Brandon Barber

Convicted real estate developer Brandon Barber may be sitting in a federal prison in Pennsylvania, but on Wednesday, he picked up a significant victory in Fort Smith.

U.S. District Judge P.K. Holmes III filed a 16-page restitution order saying that Barber is only obligated to pay $450,000 to First Federal Bank of Fayetteville for his role in a bank fraud scheme.

That is substantially less than what federal prosecutors had in mind for Barber, who pleaded guilty in July 2013 to three federal charges — conspiracy to commit bank fraud in the First Federal Bank loan case, and money laundering and conspiracy to commit bankruptcy fraud — and was sentenced Oct. 28 to 65 months in federal prison and three years of supervised release.

A restitution hearing was held Jan. 5 in Fort Smith. Springdale builder Jeff Whorton, a co-defendant in Barber’s loan scheme, was ordered on Jan. 14 to pay $100,000 to First Federal for his role in the scheme to inflate the value of land to receive a larger than necessary loan in 2008, resulting in a $550,000 loss for the bank. Barber, the driving force behind negotiations for that loan, Holmes said, is responsible for paying the remaining amount.

The government, according to court documents, was seeking a restitution amount of $16.19 million payable to three lenders — Legacy National Bank of Springdale ($7.47 million), Enterprise Bank of St. Louis ($8.17 million) and $550,000 to First Federal, banks that loaned Barber millions for real estate development projects.

Holmes disagreed with the government’s calculations, according to the order, and denied restitution claims on behalf of Legacy and Enterprise. Because Barber did not plead guilty to defrauding those two lenders, it was the government’s responsibility to present evidence proving his guilt.

That didn’t happen, Holmes said.

“The testimony at the restitution hearing did not serve to further elucidate what specific misrepresentations Barber made to either Legacy or Enterprise,” Holmes said in the restitution order. “At the hearing, Steven Williams testified that no investigation was conducted in order to determine the extent of any inflation of Barber’s net worth specifically as to the information presented to Legacy and Enterprise.

“Rather, the government relied on a statement by Vera Crider, Barber’s one-time chief financial officer, that Barber generally overstated cash and interest in LLC’s on personal financial statements provided to banks.

“The government had a wealth of financial records at their disposal,” Holmes continued, “but it appears that in the more than two years since the allegations of misrepresentations were made, no cross-referencing was ever conducted to verify what specific misrepresentations Barber may have made to Legacy and/or Enterprise. The bank representatives testified that they still were not aware of what misrepresentations Barber made on his loan applications to the respective entities.”

Holmes added that Barber was not always completely honest in his dealings with banks, but the evidence fell far short of allowing the court to make specific determinations about what misrepresentations were made to Legacy or Enterprise.

“Barber did not have to prove appropriate use of loan funds,” Holmes said. “The government had the burden of showing inappropriate diversion of funds causing a loss to the banks. It failed to do so.”

Barber was arrested in New York by FBI agents on March 20, 2013, and faced 27 counts of various federal charges, including fraud and money laundering, all of which took place from 2005 to 2009 and were designed to defraud banks, creditors and the U.S. Bankruptcy Court.

He originally entered a plea of not guilty April 15, 2013, but pleaded guilty three months later to three federal charges as part of a plea deal with federal prosecutors. The remaining 24 charges were dismissed.

Barber was transferred from the Washington County Jail to federal prison in Lewisburg, Pennsylvania, earlier this month. He must pay full restitution to First Federal immediately, and if unable to do so, it is to be paid in installments every three months, at a rate of at least 10 percent.

Barber’s attorney, Asa Hutchinson III, could not be immediately reached for comment.

Gary George, chairman of the board of Legacy National Bank, declined to comment.

To read Judge Holmes’ order on restitution, click here.