A former banker in the US state of Missouri has been sentenced to 57 months in prison for crimes involving the issuance of fraudulent letters of credit (L/Cs).

Irvin Eddington, who was sentenced having been found guilty on bank fraud and embezzlement charges, was vice president and manager of the Ellington Branch of People's Community State Bank (PCSB).

L/C crimes

Between 2004 and October 2011, Eddington created and issued numerous fraudulent unsecured irrevocable L/Cs to an associate in the name of PCSB worth approximately US$1.3 million.

The associate then secured loans from other entities using the irrevocable L/Cs as collateral.

Bank's liability

The former banker had no authority to issue the L/Cs and did so without the bank's knowledge or permission.

The associate kept and used the funds derived from the loans, leaving PCSB liable to make any loan repayments in the event of a default.

Additional frauds

Eddington also admitted to additional frauds. These included an effort to circumvent Federal Reserve regulations governing insider lending to bank officers and misrepresenting collateral by providing fake insurance documents as part of a loan application.

In addition to his prison sentence, Eddington was ordered to pay restitution of just short of US$1.2 million.

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