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Former executive’s fraud against M&T is rife with unlikely twists

Michael A. Whipple never pocketed a dime from his wrongdoing.

Yes, he engaged in fraud and, yes, he cost M&T Bank more than $5 million.

But even now, years after the FBI uncovered his loan scheme, it’s not clear why Whipple did what he did.

His lawyer says the former M&T vice president disagreed with many of the bank’s guidelines for lending money and believed strongly in the local companies he was eager to help.

“He was trying to do the right thing,” said Rodney O. Personius, Whipple’s defense attorney. “He believed in these Buffalo businesses. He thought he had a better way and, for a while, it worked.”

But then came the FBI investigation and the allegation that Whipple, one of the bank’s top loan officers, had used fraudulent means to approve more than $5 million in small-business loans.

Whipple, who was fired in 2013, pleaded guilty Tuesday to bank fraud and will face a recommended prison term of up to 78 months when he is sentenced in October. He also will be required to pay $5.3 million in restitution to M&T.

U.S. Attorney William J. Hochul Jr. referred to Whipple’s crime as “one of the largest fraud schemes in recent years” in the community.

Assistant U.S. Attorney Trini E. Ross declined to comment on Whipple’s admissions. Ross, in her plea agreement with Whipple, details how he carried out a loan scheme that lasted five years and cost the bank millions of dollars.

“He had such a fine reputation with the bank,” Personius said of his client. “Nobody questioned him.”

Whipple’s plan to help several growing companies was wrong and illegal but was always well-intentioned, his lawyer said. The strategy succeeded in getting much-needed financing to those businesses, he said, but over time, it collapsed, leaving Whipple to explain the losses.

Now 43, Whipple found himself Tuesday in a place his friends and family would have considered unimaginable five years ago – a federal courtroom facing a six-year prison sentence.

A rising star at M&T, he spent nearly two decades at the bank and four years ago was promoted to vice president in its business banking section. In that position, he oversaw a loan portfolio valued at $150 million.

Whipple, a married father of three, is also widely known in the community for his volunteer work at his church, Christ the King in Snyder, and several charities. The Canisius College and University at Buffalo graduate served as a volunteer chairman on the 2010 Catholic Charities Appeal and was on the board of trustees at St. Joseph’s Collegiate Institute and the Amherst Chamber of Commerce.

Not surprisingly, many people wonder why he would put all of that – his job, reputation and family – at risk for something that didn’t benefit him personally.

To hear Personius talk, the U.S. Attorney’s Office was ready to charge Whipple more than a year ago but held off in order to investigate his claims that he never benefited financially from his crime and that he alone engaged in the fraud. He said the FBI looked into the claims and agreed.

“It’s illegal conduct. It’s wrong what he did,” Personius told U.S. District Judge Elizabeth A. Wolford on Tuesday. “But not one dime of this money went to Mr. Whipple.”

Sources close to the case think Whipple’s real motivation may have been a desire to avoid the kind of loan defaults that could have embarrassed him and cost him his job. They noted that Whipple forged signatures and diverted mail as part of his scheme and suggested he may have grown desperate in his efforts at hiding his wrongdoing. Personius was quick to absolve M&T itself, noting that no one but Whipple was involved in orchestrating and carrying out the scheme. “They are strictly victims here,” he said of the bank.

M&T officials declined to comment on the details of the plea deal but thanked the government for its help in pursuing Whipple. Daniel C. Oliverio, an attorney and former federal prosecutor hired by the bank to investigate Whipple, was in the courtroom Tuesday.

“Mick’s guilty plea acknowledges his illegal actions,” said M&T spokesman C. Michael Zabel.

Oliverio and Zabel declined to comment on a civil suit, one of the consequences of Whipple’s loan scheme, that is still pending against M&T. The suit, which Wolford asked about Tuesday, was filed by a former M&T loan client who contends that Whipple destroyed his credit and business.

Jeffrey T. Drilling says his company, Client Server Direct in Amherst, was taking in $5 million a year in revenue when Whipple started using collateral secured by Drilling’s company to make loans to other businesses. Personius and M&T have denied those contentions, and say there’s no evidence linking Whipple to Drilling’s business woes.

For M&T, one of the country’s largest commercial banks and one of the region’s biggest employers, Whipple’s guilty plea marks an end to an embarrassing chapter in its history.

While the $6 million in bad loans may seem small in comparison to the bank’s $5 billion small-business portfolio, they revealed a lack of oversight that the bank moved quickly to correct.

From Day One, M&T officials have contended that no one except the bank lost money because of Whipple’s criminal conduct. They also said the bank is conducting an audit with an eye toward preventing future problems.