Before the coronavirus began ravaging Louisiana, federal prosecutors in New Orleans were closing in on one of their biggest targets in recent years — former First NBC Bank president and CEO Ashton Ryan, who presided over the costliest failure of an American bank since the 2008 financial crash.

But the pandemic bought Ryan, and likely some fellow defendants, a bit of a reprieve. Because of COVID-19, U.S. District Judge Nannette Jolivette Brown, the chief judge for the Eastern District of Louisiana, suspended the meeting of grand juries until at least Aug. 1. Her order was issued April 24, but people familiar with the case said there had been no movement since late March.

That likely means a grace period of at least a few months for Ryan and others who find themselves in the government’s crosshairs in the First NBC case, which observers say is the most complex and consuming case U.S. Attorney Peter Strasser’s office has been working over the last couple of years.

A grand jury has been investigating the bank's collapse for more than two and a half years, and prosecutors have secured guilty pleas from at least three key players to date. In court documents, each said they conspired with Ryan to defraud the bank of tens of millions of dollars through false or misleading loan applications. That group includes developers Jeffrey Dunlap and Kenneth Charity, and Gregory St. Angelo, who was First NBC’s general counsel.

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Gregory St. Angelo, rear, First NBC Bank's former chief counsel, pleaded not guilty to bank conspiracy charges in federal court in New Orleans in March 2019. He later pleaded guilty and agreed to cooperate with prosecutors. In the foreground is St. Angelo's lawyer, Peter Thomson. 

Ryan hasn't yet been formally accused of any crimes by name. Eddie Castaing, Ryan’s attorney, said this week that Ryan “maintains his total innocence.”

While Ryan is clearly the government’s primary target in the bank’s $1 billion implosion, sources familiar with the case do not expect him to sit alone at the defense table. One insider said he expects at least a half-dozen people to face charges, although it’s still unclear whether they will be rolled into a single indictment or charged separately.

Prosecutors have already made clear they intend to target William Burnell, the bank’s chief credit officer. In documents charging St. Angelo, they portrayed Burnell as a key co-conspirator with Ryan, who is referred to as "Bank President A." Observers expect other bank executives will face charges, a group that could include Robert Brad Calloway, the bank’s former chief credit officer. Calloway was accused in a civil filing by the Federal Deposit Insurance Corp. of helping to submit false or misleading information in support of a series of loans.

Additional borrowers could also get swept up in the case if prosecutors believe they committed fraud to get their credit extended. Among those whose loans the government is scrutinizing is businessman and former longtime St. Bernard Parish prosecutor Glenn Diaz, according to sources familiar with the probe.

Diaz, who slipped quietly out of public life after a failed campaign for district attorney in 2014, was in arrears on millions of dollars in First NBC loans that the feds consider dodgy. Another possible target is Mississippi developer Gary Gibbs, the recipient of the loans that were flagged by the FDIC in its civil allegations against Calloway. Those loans alone totaled $123 million when the bank collapsed.

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Slidell contractor Jeffrey Dunlap of Phoenix Civil Contractors, left, and his attorney Walter Becker walk to Federal Court in New Orleans Wednesday, Oct. 17, 2018, where Dunlap pleaded guilty to one felony count of conspiracy to commit bank fraud involving a $22 million line of credit from First NBC Bank.

Diaz’s attorney, Buddy Lemann, declined to comment on the feds’ interest in St. Bernard’s former lead trial prosecutor.

“Everything’s on hold,” Lemann said of the case involving Diaz.

Calloway’s lawyer, Mike Magner, declined comment; he has previously denied the FDIC’s allegations and said Calloway plans to strenuously contest them.

Gibbs’ lawyer, Timothy Yazbeck, likewise had no comment.

Burnell’s lawyer, Brian Capitelli, said that an April 22 lawsuit filed by the FDIC against Ernst & Young LLP, one of the “Big Four” accounting firms, finds no fault with his client. The federal agency’s suit, which seeks at least $125 million in damages, charges that Ernst & Young fell asleep at the wheel in conducting its annual audits of the bank.

Capitelli noted the FDIC had three years to investigate “the lending practices and procedures” at First NBC.

“Bill Burnell is not named as a defendant or even referenced in the detailed lawsuit,” he said. “My client, like others at First NBC Bank, appropriately relied upon the expertise of the auditors at E & Y. The FDIC’s exhaustive allegations illustrate what I have said all along — Bill Burnell did nothing wrong.”

A local decision

There are 94 federal district courts around the U.S., and decisions about how to proceed with ongoing cases and grand-jury matters have been left up to the chief judges in each jurisdiction. The New Orleans federal district court’s postponement of grand jury meetings until August is among the longest shutdowns any federal court has seen fit to invoke, according to a recent story in Law360, a legal affairs blog.

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The delays can cause a variety of problems for prosecutors. For one, nearly all crimes have five-year statutes of limitations, which means that a crime must be charged within that time frame. Federal investigations often take years to complete, meaning it’s not unusual for charges to be filed just as a case is about to “prescribe,” or expire.

For Ryan and the others at the center of the First NBC probe, those statutes aren’t likely to provide much protection; bank fraud has an unusually long, 10-year lifespan.

“We don’t have any prescription issues coming up in the next three months on any cases I’m aware of,” U.S. Attorney Peter Strasser said of the impact of the grand jury shutdown at Camp and Poydras. Strasser himself is recused from the First NBC case because Dunlap, a major player in it, is represented by his former law firm, Chaffe McCall.

“As far as prescription is concerned, we’re OK in the short term.”

Still, Strasser added, “It’s definitely an inconvenience. We’re doing the best we can, and looking forward to the day we can reconvene a grand jury — hopefully sooner rather than later.”

In some other jurisdictions, judges have ruled that the statutes of limitations will be extended, or tolled, to account for the postponement of grand jury activity, according to the Law360 article.

Such extensions might not stand up on appeal, however. Several lawyers told The Times-Picayune that only a defendant has the discretion to waive a statute of limitations. It’s something defendants exercise in rare cases when they believe additional investigation will clear them.

Another possible complication of the shutdown: Grand juries, which have 23 members, typically meet weekly for a finite period of time — usually six months. That six months can and often is extended to 12 or 18 months, but that is the limit.

Prosecutors don’t need to throw in the towel if they can’t win an indictment on a complex case before a grand jury retires.: They can bring the same witnesses before a new grand jury. In some cases, they simply read highlights of testimony from the earlier grand jury to a new one.

One controversial and complex case was being presented by the U.S. Attorney’s Office to a grand jury in its third term, now set to dissolve June 30, presumably without meeting again. Prosecutors were presenting evidence and a parade of witnesses surrounding the 2005 death of Joey Georgusis, the son of Joe Georgusis, a wealthy and politically active developer of strip shopping centers.

The senior Georgusis has spent years and hundreds of thousands of dollars to investigate his son’s death, which came three weeks before Hurricane Katrina and was ruled a likely drug overdose by the Orleans Parish Coroner’s Office at the time. The father’s theory: His son was murdered, possibly by drug dealers, and that there was an elaborate coverup that may have involved law enforcement officials.

A decade after Joey Georgusis’ death, then-Coroner Jeffrey Rouse, whose campaign received much of its financial support from the senior Georgusis, changed the cause of death to undetermined, clearing the way for a possible homicide investigation.

Allies and paid consultants of Georgusis, including then-Jefferson Parish Sheriff Newell Normand, urged then-U.S. Attorney Kenneth Polite to open a probe into the matter. Polite’s office opened a file, but the case essentially languished.

After Strasser became U.S. attorney in 2018, the matter was assigned to a pugnacious prosecutor named Michael McMahon, who began pressing the case before a grand jury. Strasser is recused from the matter; he was Georgusis’ private lawyer before he became U.S. attorney.

McMahon retired late last year over a falling out with Strasser involving the Georgusis case, which was reassigned to another prosecutor in the office.

Though the grand jury that had been hearing evidence since early 2019 will presumably expire in June without convening again, a source with knowledge of the case said that doesn’t mean it’s over. Where the case goes from here, the source said, will depend on a number of factors, including the potential of fresh expert analysis on how Joey Georgusis died back in the summer of 2005.

Staff writers John Simerman and Ramon Antonio Vargas contributed to this report.