Three area bankers are expected in court Thursday in response to a federal grand jury indictment charging them with a dozen crimes.

PANAMA CITY — Three area bankers are expected in court Thursday in response to a federal grand jury indictment charging them with a dozen crimes.

U.S. Attorney Pamela Marsh announced the indictments against Donald Terry Dubose, 65, of Panama City Beach; Elwood Ladon West, 39, of Monroeville, Ala.; and Frank Alfred Baker, 61, of Marianna, on Wednesday afternoon. Dubose and West were executives with Coastal Community Investments, a holding company that controlled Panama City Beach-based Coastal Community Bank and Port St. Joe-based Bayside Savings Bank before they failed in July 2010. Baker was a Coastal attorney and its largest shareholder.

The three are accused of ripping off millions of dollars from a Federal Deposit Insurance Corp. (FDIC) program designed to ensure banks could find loans from other banks.  

Under the Temporary Liquidity Guarantee Program, which was created during the onset of the Great Recession to help stabilize the economy, the FDIC would pay a lender who could not recoup a loan made to another bank, similar to how the FDIC repays depositors if their bank fails.

According to the 19-page indictment, which had been sealed until Wednesday since the grand jury returned it July 9:

In October 2007, Dubose and West, as Coastal’s chief executive officer and chief financial officer, respectively, sought a loan from another bank for $3 million with the common stock of both banks used as collateral. They got the loan, but when it came time to repay they were unable. By October 2008, the loan went into default and the lenders stood to take control of the stock in the banks used as collateral, which would have rendered their shares worthless.

Under pressure from the lender, Dubose, West and Baker sought to borrow money from a third bank, CenterState Bank of Florida, under the FDIC program. But to qualify for the program, Coastal’s outstanding debt had to be unsecured, and it wasn’t.

So, the indictment says, the bankers convinced the FDIC that they had not used any collateral on the initial loan, CenterState loaned Coastal the money to repay its debt, Coastal failed to repay CenterState and in August 2010 the FDIC paid out nearly $4 million to cover Coastal.

In the meantime, as Coastal continued to deteriorate, Dubose duped investors into buying his stock in the bank by misrepresenting the nature of the stock and the financial health of the bank. Coastal even loaned investors money to buy his stock.

After the banks failed, Dubose and his wife sued the FDIC, claiming, among other things, they were owed a pension. The suit was dismissed.

The three men are charged with conspiracy to commit wire fraud against the FDIC, seven counts of wire fraud, three counts of making false statements to the FDIC and one count of aiding and abetting a false claim against the United States. Each count of conspiracy and wire fraud carry maximum prison sentences of 30 years, and the other counts are each punishable by up to five years in prison.

Assistant U.S. Attorney Gayle Littleton will prosecute the case.