Category Archives: Financial Services

Cadence Bank to merge with BancorpSouth in all-stock deal

Cadence Bancorporation, based in Houston, has agreed to an all-stock merger with BancorpSouth, based in Tupelo, Mississippi. The combined business will have a market capitalization of $6 billion.



The two banks are quite complementary is that Bancorp is a community bank, while Cadence brings commercial banking expertise. Bancorp has 325 full-service branch locations in Alabama, Arkansas, the Florida Panhandle, Louisiana, Mississippi, Missouri, Tennessee and Texas. Cadence has 98 branches in Alabama, Florida (around Tampa), Georgia (where Bancorp South has no presence), Mississippi, Tennessee, and Texas.

The two banks have contrasting histories. Bancorp was founded in 1876 in Verona, Mississippi and moved to Tupelo ten years later.  In contrast, Cadence was only formed in 2009 by banking industry veterans who helped grow Amegy Bank before it was sold to Zions Bancorporation in 2005.

The shareholders of Bancorp will get 55% of the combined equity, Cadence 45%. The company will keep the Cadence name. It will have its corporate headquarters in Houston, but its banking headquarters in Tupelo.

Dan Rollins, the CEO of Bancorp will become the Chairman and CEO, while Paul Murphy, CEO of Cadence will become Executive Vice Chairman. Mr. Rollins, before becoming CEO of Bancorp in 2012, spent 18 years in Houston as President and COO of Prosperity Bank.

Chis Bagley, COO of Bancorp will become President of the combined group. He’s also ex-Prosperity, having spent 17 years there. Valerie Toalson, the CFO of Cadence, will become the CFO of the combined group.

The deal is expected to close in the fourth quarter of 2021.

SEC filing – Cadence BanCorp merger

 

Houston woman charged with $3.6 million PPP loan fraud

LaDonna Wiggins, 37, has been charged with bank fraud and money laundering in relation to two Paycheck Protection Program (PPP) loans. She received $3.6 million and allegedly used these funds to buy two houses, multiple vehicles and luxury goods.



She made two loan applications for her businesses Wiggins & Graham Enterprise, dba ‘The Concession Stand and Pink Lady Line. In May 2020, she submitted an application for the first business stating she had 108 employees. The application for the second business was made the following month. She stated that she had 107 employees for that business.

Both loans were funded by Kabbage, Inc, an online funding company for small business owners.

Some of the funds were allegedly spent as follows;

  • $688k for a house in Cypress, Texas
  • $248k for a house in Katy, Texas
  • $79k for a 2020 Range Rover
  • $52k for a 2020 Nissan Murano
  • $63k at Chanel
  • $188k on a new swimming pool
  • $180k on construction work
  • $6k on an aquarium and tropical fish
  • $200k to buy an unnamed business

If convicted, Wiggins faces up to 30 years in federal prison and a possible $1 million maximum fine. The government also intends to seize the remaining cash in her bank accounts (approx. $0.5 million), the two houses and the Range Rover.

Wiggins indictment – pdf

https://www.justice.gov/usao-sdtx/pr/local-woman-charged-fraudulently-receiving-millions-under-cares-act

You can read about the other Houston-area residents charged with PPP fraud;
Six-houston-area-men-charged-in-16-million-ppp-loan-fraud/
Houston-woman-charged-with-1-9-million-ppp-loan-fraud/
Houston-man-charged-with-spending-covid-relief-funds-on-lamborghini/
Houston-funeral-director-charged-with-ppp-fraud/
Another-houston-man-charged-with-ppp-fraud/

Cardtronics accepts higher bid from NCR

NCR has agreed to buy Houston-based Cardtronics for $1.8 billion or $39 a share. Last month, the company had accepted a bid of $35 a share from two private equity firms, Apollo Global Management and Hudson Executive Capital.



Cardtronics is the world’s largest ATM operator with 285,000 ATMs in 10 countries. The company owns about a quarter of the ATMs. For the rest, Cardtronics manages the ATMs for customers such as Walgreens and CVS. Approximately half of its $1.2 billion of revenues comes from the company charging end users a surcharge fee for using its company-owned ATMs.

NCR, based in Atlanta, makes ATMs as well as point-of-sale systems and self-service kiosks for businesses such as retailers and restaurants. It has revenues of $6.2 billion, over four times the revenue of Cardtronics.

Douglas Braunstein, a non-executive director since June 2018, is the Founder & Managing Partner of Hudson Executive Capital LP. It owns 19.4% of the stock of Cardtronics.

Timeline of the deal

According to the proxy statement filed earlier this month, the company first approached private equity firms in May 2019. Apollo was one of them and they submitted a non-binding indication of interest in June 2019. The Board did not it compelling enough and shelved discussions.

After the company withdrew its 2020 annual guidance in April 2020, Apollo again reached out to the company, expressing interest in the company. In August, Apollo approached Hudson about teaming up on a transaction. The firms subsequently submitted an oral offer of between $30 and $32 a share.

In October, the Board decided to seek alternative partners. Goldman Sachs approached 8 different parties. NCR was not one of the 8. Only one of these parties submitted a non-binding offer of interest and even that party did not want to pursue a deal in the timeline set by the company.

Two days after Cardtronics disclosed on December 9 that it has received a proposal from the PE firms for $31 a share, NCR contacted the company, expressing interest. Three days, NCR submitted a written bid for $36 a share.  On New Year’s Eve, NCR upped the bid to $39 a share.

Fees and Golden Parachutes

Under the terms of the agreement with the PE firms, Cardtronics would have to pay a break-up fee of $32.6 million if the company accepted a higher offer. NCR has confirmed that it has paid this fee to the company.

CEO Ed West is line for a golden parachute payment of at least $26.5 million. The four other members of the senior management team will share at least $22 million.

NCR expects annualized cost savings of $100-$120 million.

Goldman Sachs got a fee of $5 million when the deal with the PE firms was initially announced. A further $20 million will be paid when the acquisition closes.

The deal is expected to close in mid-2021.

SEC filing – NCR acquisition of Cardtronics

 

Famous Houston pastor gets 6 years for $3.5 million fraud

Kirbyjon Caldwell, a famous Houston pastor, has been sentenced to 6 years in prison for conspiracy to commit wire fraud. Caldwell was ordered to pay restitution in the amount of $3,588,500, as well as a fine of $125,000.



Mr Caldwell built up Windsor Village United Methodist Church in SW Houston into a 18,000 member mega church and was a spiritual advisor to President Bush. He offered the benediction at both his inaugurations and officiated at the wedding of President Bush’s daughter, Jenna. He was also a spiritual advisor to President Obama.

Former Investment Banker

Caldwell is a former director at Continental Airlines (until 2011) and NRG Energy (he left the board one month after he was indicted in 2018).  He was also a minority owner in the Houston Texans until recently. Prior to becoming a pastor he was an investment banker on Wall Street and worked for a bond firm in Houston. He has a master’s degree from Wharton School of Business.

The fraud scheme

Caldwell was charged along with Gregory Smith, a Shreveport-based investment advisor. Smith pleaded guilty in July 2019. Smith was also sentenced to 6 years back in November.

Between April 2013 and August 2014, Caldwell and Smith raised $3,588,500 from 29 investors through a fraudulent offer and sale of various pre-1949 Chinese bonds. Caldwell and Smith falsely represented to these investors that the bonds were safe, risk-free, worth tens, if not hundreds of millions of dollars and could be sold to third parties. In reality, the bonds have no investment value.

The Chinese government doesn’t recognize the validity of bonds issued prior to the communist takeover of 1949. It has never paid out on any of these bonds, except once in 1987. As part of the negotiations over Hong Kong, the Brits received 36 cents on the dollar. The US courts have generally said that the People’s Republic of China can assert sovereign immunity in not paying these debts.

Caldwell kept approximately $0.9 million and used it to pay down personal loans, mortgages and credit cards. Smith received $1.1 million of the total monies raised.

Caldwell surrendered his clergy credentials before pleading guilty in March 2020.

At the sentencing hearing, Caldwell’s lawyers presented evidence that he has repaid his victims more than $4 million. They also pleaded for him to be confined to his home, rather than going to prison, citing his ongoing treatment for prostate cancer, as well his hypertension and the threat COVID-19 poses for those incarcerated with underlying conditions.

Caldwell was ordered to report to the Bureau of Prisons on June 22, 2021.

https://www.justice.gov/usao-wdla/pr/former-houston-texas-pastor-sentenced-federal-prison-his-role-multimillion-dollar

Insurance blank check company completes IPO

Delwinds Insurance Acquisition has completed its $200 million Initial Public Offering. It becomes the 7th Houston-area blank check company to go public this year. It will be listed on the NYSE.



The company was formed by The Gray Insurance Company and is based in downtown Houston. CEO Andrew Poole is an investment consultant at Gray while CFO Bryce Quin, is a process improvement specialist at Gray. They previously led a blank check company called Tiberius that went public in 2018. It subsequently acquired International General Insurance earlier this year.

Delwinds plans to target businesses in the insurance technology sector or brokers or carriers that use insurance technology (i.e. using data analytics or artificial intelligence to better price risk or automate back offices procedures).

https://www.globenewswire.com/news-release/2020/12/15/2145792/0/en/Delwinds-Insurance-Acquisition-Corp-Announces-Closing-of-201-250-000-Initial-Public-Offering.html

Houston ATM company receives buy-out offer

[UPDATE 15 Dec 2020 – Cardtronics has now agreed to a buy-out offer of $35 per share from the two PE firms].

Cardtronics has received a buy-out offer from two private equity firms. Apollo Global Management and Hudson Executive Capital have jointly offered to buy the stock for $31 per share.



Cardtronics is the world’s largest ATM operator with 285,000 ATMs in 10 countries. It has its head office in the Westchase area of Houston. The company owns about a quarter of the ATMs. For the rest, Cardtronics manages the ATMs for customers such as Walgreens and CVS. Approximately half of its $1.2 billion of revenues comes from the company charging end users a surcharge fee for using its company-owned ATMs.

At the height of the pandemic in March, ATM withdrawals in the US fell about 30% year-on-year. By Q3, volumes were flat year-on-year. The company also has a presence in the UK, where Q3 ATM withdrawals were still 33% down on a year earlier. As a result, the stock price hit a low of $16 in March, having been $47 in January 2020.

After the offer was announced, the share price rose 32% to $34.11. This gives the company a market capitalization of $1.15 billion.

Douglas Braunstein, a non-executive director since June 2018, is the Founder & Managing Partner of Hudson Executive Capital LP. It owns 19.4% of the stock of Cardtronics.

Mr. Braunstein has recused himself from any discussions that the Cardtronics Board of Directors has had regarding any transaction. The other members of the Board of Directors will review and assess the terms of the proposal.

Cardtronics has retained Goldman Sachs & Co. LLC as its financial advisor and Weil, Gotshal & Manges LLP and Ashurst LLP as its legal advisors

https://ir.cardtronics.com/news-releases/news-release-details/cardtronics-confirms-receipt-proposal-apollo-global-management

 

Conroe bank appoints new CFO

Spirit of Texas Bancshares has appointed Allison Johnson as its new CFO. She has been serving as the interim CFO since Jeff Powell died unexpectedly in January.

The company has its head office in Conroe, TX. It operates 38 full-service branches in Texas. It went public in May 2018 and has a market capitalization of $283 million.

Allison Johnson joined the company as its Chief Accounting Officer in 2016. Prior to that, she worked at Florida Community Bank in 2016. She started her career at PricewaterhouseCoopers.

No compensation arrangements for Ms. Johnson were disclosed.

SEC filing – Spirit of Texas CFO appointment

Mother and stepson sent to prison for $7 million bank fraud

Leyla Wydler and her stepson, Carlos Wydler, have been sent to prison following their conviction by a jury in March 2017. The mother was sentenced to 11 years in June, the step-son got 7 years today.

Leyla Wydler was the owner of several Houston-area businesses including Globan Mortgage Company, Casa Milagro and First Milagro. In 2007, Farmers and Merchants Bank of Long Beach, a California Bank, hired Carlos Wydler. He was in charge of the bank’s credit card department.



Leyla would sent credit card applications to the bank, Carlos would approve the requests for high credit lines, but would ‘advance’ the entire credit line to the borrower via wire or check. Leyla would take a fee from the borrowers’ loan proceeds. The scheme ran for about a year.

The mother and stepson were developing a real estate project in Houston and used the proceeds to finance investors in their project.

Leyla Wydler skimmed more than $1.4 million from loan proceeds. Carlos Wydler approved approximately $600,000 more in unauthorized loans to family members. More than half of the Texas borrowers run through the Wydler-family business in Houston defaulted on their loans. The bank sustained a loss of nearly $7 million.

The defendants were convicted of conspiracy, bank fraud, false statements on credit applications, wire fraud and mail fraud. Carlos Wydler was also found guilty on six counts of misapplication of bank funds.

Carlos Wydler was ordered to pay $6.8 million in restitution. Leyla Wydler was ordered to pay $6 million.

https://www.justice.gov/usao-sdtx/pr/former-banker-and-mortgage-broker-sent-prison-defrauding-california-bank

Houston tax preparers indicted for false filing of tax returns

Two Houston-area woman have been indicted on 32 counts related to the false filing of tax returns.

Rita Rogers and Joi Lin Hunt owned Caliente Xpress Tax Service in Sharpstown, Houston. The business started in 2014. At its peak, the business had 12 employees.



According to the indictment, they allegedly prepared returns for customers for the 2013-2016 tax years that included false schedules on 1040 forms. These claimed company losses for customers who did not own any businesses and had no such expenses.

The indictment further alleges Hunt and Rogers did not inform customers that the 1040 forms were being prepared on their behalf. Although the taxpayers would collect the refunds, Caliente Xpress charged fees ranging from $300 to $600 to prepare the return.

During the 2013-2016 tax years, Hunt and Rogers prepared 2,613 tax returns, according to the indictment. 98% received refunds, totaling $13.5 million. For 66% of these, Caliente allegedly claimed fictitious expenses on a Schedule 1040.

It appears that, during 2016, taxpayers started getting letters from the IRS that their 2013 or 2014 tax return was under audit. An undercover IRS Special Agent later visited the business in February 2017, posing as a taxpayer needing a return prepared. Rogers initially prepared a correct tax return that reported a tax due to the IRS. She then, allegedly prepared another return, claiming false expenses and a refund due. Hunt transmitted the return to the IRS.

If convicted, both face up to five years imprisonment and a possible $250,000 maximum fine.

Caliente Xpress indictment

https://www.justice.gov/usao-sdtx/pr/two-houston-area-tax-preparers-indicted

Another Houston man charged with PPP fraud

Joshua Argires, 29, of Houston, has been charged with COVID relief fraud. He allegedly made two fraudulent applications for more than $1.1 million in forgivable loans through the Paycheck Protection Program (PPP).



The complaint alleges that Mr Argires made applications on behalf of two businesses, Texas Barbecue and Houston Landscaping. He allegedly claimed that the two companies had numerous employees and hundreds of thousands of dollars in payroll expenses.

The $956,000 Texas Barbecue loan was funded through PrimeWay Federal Credit Union, while the Houston Landscaping loan was funded by Bank of America.

The funds received on behalf of Texas Barbecue were allegedly invested in a cryptocurrency account. The funds obtained for Houston Landscaping were held in a bank account and slowly depleted via ATM withdrawals.

Mr Argires is charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions.

Last month, another Houston man, Jase Gautreaux, was charged with fraudulently seeking over $13 million through PPP loans.

https://www.justice.gov/usao-sdtx/pr/another-houston-man-charged-covid-relief-fraud