In FNBC fraud trial, doctor testifies she was duped by Kenneth Charity and left with $12m debt

A doctor from the Washington, D.C. area described Monday how she had been duped by developer Kenneth Charity into signing guarantees on First NBC Bank loans that left her on the hook for $12 million by the time the bank collapsed in April 2017.

Stephanie Carter-Stinson, a geriatric internist with a practice in Alexandria, Virginia, gave her testimony at the start of the third week of the federal trial of former First NBC Bank chief Ashton Ryan on charges of bank fraud, conspiracy and falsifying bank records, which the U.S. Attorney alleges led to the bank's failure with $1 billion in bad debts.

Also on the witness stand Monday was Jeffrey Dunlap, a Slidell contractor who was the third of nine former bank officials and borrowers who have pleaded guilty to conspiracy and agreed to testify in exchange for lighter sentences.

The borrowers are the core of the government's case, which alleges that they fraudulently racked up hundreds of millions of dollars in loans over a period of about a decade, with Ryan acting as their loan officer. They allege Ryan worked with them to conceal from the bank's overseers the fact they had no means to pay them back.

Ryan's defense counters that the bank chief had been simply trying in good faith to prop up some of the bank's most troublesome borrowers, several of whom he said lied to him about the true state of their finances.

Carter-Stinson's testimony followed Charity's on Friday, when he blamed Ryan for allowing him to run up $18 million in debt even though he knew Charity was essentially broke and an incompetent businessman. He said Ryan was aware that he was using loan proceeds on personal items, which amounted to $3 million over a decade and included renovations to a $1 million house, Rolex watches, expensive private schools for his children, vacations and Mercedes-Benz automobiles for himself and his wife.

A shoulder to lean on

Carter-Stinson said she first met Charity while at college in the 1980s, and the two had a romantic relationship. She said they had remained friends and Charity had been supportive during tough times.

"As I was going through a divorce that was particularly messy, he was someone I could reach out to and talk to," Carter-Stinson said. "He helped me get through what was at the time an awful mess."

She said she wanted to repay the favor when Charity came to her after Hurricane Katrina and said he needed her guarantee to borrow money for investment properties that Frist NBC Bank would finance.

Over the next several years, the loans started to pile up and Charity would badger her to sign paperwork, assuring her that the loans would be paid off once his property deals matured. These included a beignet shop and condominium in the renovated Jax Brewery on Decatur Street; three gas stations on the north shore; and a shopping center in Lake Terrace that was in need of rehabilitation.

Six years of loans

That payday never came and over a period of about six years until the bank collapsed in 2017, Carter-Stinson was guarantor on 86 loans from First NBC to Charity, totaling about $18 million.

The government has pressed its case by showing bank documents Ryan had signed that said that each loan was supported by her assets and salary as a doctor, which were between $500,000 and $800,000 a year.

Ryan's defense counsel, Edward Castaing Jr., asked if she knew what Charity had been saying to Ryan about her finances, and he asked about her willingness to support the loans with her own assets and income. She said she did not.

Carter-Stinson said that she had never represented herself as Charity's sister, as Charity had claimed. She testified that emails purporting to be from her to Ryan referring to Charity as "my brother" were in fact forgeries sent by Charity.

Asked by Castaing why she kept guaranteeing Charity's ballooning loans, she said, "My biggest answer was fear. I didn't know anyone in New Orleans other than Kenneth Charity. I had no idea if I said 'just cut me off' what that would obligate me to."

Vultures gather

After the bank was seized by the Federal Deposit Insurance Corporation and sold off the bad debts for cents on the dollar, she found a "vulture fund" called Summit Investment Management had bought the loans she had guaranteed and was pursuing her for $12 million in the District of Columbia civil court.

Carter-Stinson said that she negotiated a confidential settlement at the beginning of this year with Summit.

"Needless to say, this has been a very long and difficult road for her," Carter-Stinson's attorney, David Halpern, said via email after her testimony. He said it has impaired her credit and ability to borrow money for real estate and her medical practice, and cost her substantially to defend herself in the five-year litigation over the debt.

Dunlap's cross-examination continues on Tuesday.