Iowa bank’s lawsuit claims financial statements were fabricated as part of $44M loan scam

On Monday, FBI agents searched Hickman home of financial adviser to Lincoln businessman Aaron Marshbanks
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This rural home, owned by financial advisor Jesse Hill near Hickman, was searched Monday by FBI agents in connection with a bank fraud investigation involving a deceased Lincoln businessman. (Paul Hammel/Nebraska Examiner)

LINCOLN, Neb. (Nebraska Examiner) — An Iowa bank, one of the many victims in a purported bank fraud case, is asking for an emergency court hearing and the appointment of a special investigator to determine whether the estate of a Lincoln businessman has sufficient funds to pay back at least $44 million in loans.

Midstates Bank of Council Bluffs, in a court filing Friday, said that Aaron Marshbanks owes it $2.4 million for loans made in March of this year to purchase and rehabilitate homes.

The bank maintains that Marshbanks and his financial adviser, Jesse Hill, fabricated assurances that an investment account held $6 million to $7 million as security for the loans made to a Marshbanks entity, Big Bear Capital LLC.

‘Account does not exist’

“In fact, the investment account does not exist, and Midstates likely has no collateral securing its loan to Big Bear,” a lawsuit, filed Friday, stated.

Hill’s home, a $2 million acreage near Hickman, was the subject of a search Monday involving the FBI, the Examiner learned. FBI spokeswoman Amy Adams said that there were no arrests and that she could not comment further because it is an ongoing investigation.

Hill was recently sued by the Nebraska Bank of Commerce in connection with one loan he obtained with Marshbanks in March.

Hill fined in 2018

Also, in 2018, he was fined by state banking regulators in connection with an unconnected sale of unregistered securities. Attempts to reach Hill on Monday, including a stop at his acreage Monday afternoon, were unsuccessful.

More than 20 Nebraska and Iowa banks, savings and loans and credit unions have filed claims, now totaling $44 million, against the estate of Marshbanks since he was found dead Nov. 2 in a downtown Lincoln parking garage.

On Monday, two more financial institutions filed claims against Marshbanks’ estate. One of them, Charter West Bank of Omaha, claimed that loans of $2 million granted to Marshbanks beginning in October 2021 were obtained fraudulently by claiming, falsely, that an investment account held more than $6 million in assets.

Some of the loans provided houses, mostly in northeast Omaha, as collateral, but several were issued on the basis of a personal guarantee by Marshbanks, and sometimes Hill, that the loans would be repaid.

Earlier this month, the Nebraska Department of Banking and Finance acknowledged they were investigating what one state banking association official described as a “pretty sophisticated” bank fraud case.

Financial adviser fined in 2018

More than a dozen limited liability companies, under a variety of names, were utilized to obtain the loans. In some cases, investment accounts held by Hill’s firm, SOJO Capital Group LLC, of Hickman, Nebraska, were pledged as collateral.

An email request Monday for comment from the attorney representing the Marshbanks estate, Brandon Hamm of Omaha, was not immediately returned. Hill has not returned messages left with him over the past week, including Monday. No one answered a knock on the door Monday at Hill’s acreage near Hickman.

The Examiner learned that Hill was fined $7,500 in 2018 by the Nebraska Department of Banking for selling about $4 million in unregistered securities. Hill and his JT Equity Trading LLC were also ordered to pay back the investments as part of a consent agreement.

Brandon Tomjack, an Omaha attorney representing Midstates Bank, said he could not comment on the court filings.

The case may represent one of the largest bank frauds in Nebraska history once all the claims are filed.

Court filings Friday

Midstates filed a lawsuit Friday in Pottawattamie County District Court against Big Bear Capital LLC, as well against the financial advisor, Jesse Hill of Hickman, and Hill’s firm, First SOJO Capital Group LLC.

The bank also filed a request in Lancaster County Court on Friday seeking the appointment of a special administrator to investigate whether Marshbanks’ estate has assets to repay the banks.

The court filing said that is doubtful and that the current personal representative of the estate, Marshbanks’ widow, “cannot be expected to thoroughly investigate Decedent’s fraudulent activities.” The widow, the filing stated, may not have “the time or energy” to determine if assets exist, and probably has a conflict of interest in such a pursuit.

Midstates asked that an emergency hearing be set, if possible, prior to Dec. 21, saying that time is of the essence.

Assets ‘likely’ are insufficient

“Every day that passes makes it more difficult for Midstates and the other claimants to trace and/or recover the funds they loaned to Decedent’s entities,” the Iowa lawsuit maintains. It added that it’s “likely” Marshbanks estate lacks the assets to pay creditors’ claims.

Since the Examiner first reported on the case, there has been speculation about how Marshbanks, a former treasurer for the Lincoln Christian School who was involved in charity work, had gotten into financial trouble.

The married father of four had been in the process of building a luxury home in east Lincoln, complete with a cottage for guests and a “barndominium” with an indoor basketball court and wet bar. Some sources estimated the acreage project to cost upwards of $6 million. There has also been speculation that he had suffered investment losses, possibly in cryptocurrency.

The Midstates lawsuit said it’s “possible” that some or all of its loan proceeds were transferred to an account at an Omaha credit union. A message left with Liberty First Credit Union was not immediately returned Monday.

Agreed to minimum balance of $4 million

In the lawsuit, Midstates said Marshbanks contacted the bank in February about obtaining a loan. Before the loan was issued, the bank reached out to the financial adviser, Hill, about the investment account offered as collateral.

The bank told Hill and Marshbanks that it would require “control” of the investment account, as well as maintenance of at least a $4 million balance in it, before it would issue the loan.

Marshbanks and Hill agreed, and a $2 million loan was issued March 9. Marshbanks and Hill also signed two other agreements, one to provide control over the investment account and another to give the bank control over investment properties held by Big Bear Capital.

A month later, Marshbanks contacted the bank to tell officials he had enlisted Piedmont Fund Services Inc. to provide accounting services related to the investment account used as collateral.

In August, the bank loaned Marshbanks an additional $500,000 upon an agreement that the minimum amount in the investment account be increased to $5 million.

Three statements allegedly fabricated

During 2022, Marshbanks delivered three statements to the bank showing that the investment account held between $6 million and $7 million, according to the bank’s lawsuit.

But, the lawsuit stated, the investment account “does not exist” and the statements from Piedmont were “false statements (and) were not prepared by Piedmont.”

“Piedmont has no knowledge of Big Bear (Capital),” the lawsuit said, referring to the corporate entity Marshbanks used to obtain the loan.

The lawsuit maintains that both Hill and Marshbanks “fraudulently misrepresented” the assets in the investment account and conspired to obtain the loans from Midstates. The bank made several requests for financial records of Hill.

Also, the Examiner learned that Hill has been sued by the Lincoln-based Nebraska Bank of Commerce over a $500,000 loan he and Marshbanks obtained in March.

The lawsuit, filed Dec. 5, claims that Hill and Marshbanks had violated the terms of the loan by failing to retain at least $1.5 million in an investment account associated with Grit Capital LLC. The lawsuit seeks to have the bank paid the $458,000 balance owed on its loan.

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