La Jolla Banker bought ticket to perdition

Amalia Martinez, head of Small Business Administration lending at the now-defunct La Jolla Bank, pleaded guilty today, September 25th, to conspiracy to misapply bank funds.

Martinez admitted that she and other senior bank officials accepted cash and kickbacks from borrowers to issue hundreds of million of dollars to borrowers that they knew were unlikely to repay. This practice led to collapse of the bank in 2010, when it was seized by the Federal Deposit Insurance Corporation.

Martinez and her fellow bankers overlooked negative information when approving fraudulent loan applications. In late 2007, a borrower from the construction industry handed $100,000 in cash to a senior bank official, who shared it with Martinez and others.

When the borrowers defaulted, the bank executives would issue even more bad loans to cover up the original ones. In banking, that is a ticket to perdition. Martinez is the fourth defendant to be charged in the case.