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Former SC banker pleads guilty to defrauding low-income housing program

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Former Lowcountry banker Karl Zerbst has pleaded guilty to conspiring the defraud the federal government, according to documents in federal court in Charleston. File

A former Lowcountry bank executive has admitted his guilt in a conspiracy to defraud federal housing programs geared toward low-income and military families.

Karl Henry Zerbst Jr. faces up to five years in prison and a $250,000 fine on the conspiracy charge, according tro document filed Sept. 10 in federal court in Charleston.

He will be sentenced at a later date.

Court documents said Zerbst and an unidentified co-conspirator falsified information on forms submitted for grants that were to pay for repairs to homes owned by low-income people. Those programs, administered by the Federal Home Loan Bank of Atlanta, were supposed to cover costs of roof repairs, flooring, heating and cooling systems and other projects.

Eligible homeowners could receive up to $12,500 apiece in funds sent from the Atlanta bank to local lenders for disbursement.

Federal prosecutors say Zerbst and an accomplice engaged in a kickback scheme involving 91 falsified transactions over a 31-month period, netting nearly $250,000 for the former banker.

Zerbst and his associate conducted 43 financial transactions to conceal the kickbacks, according to court documents.

Zerbst, a former market president for First Reliance and Ameris banks who now works in the real estate industry, must repay the money as part of his plea agreement.

Mount Pleasant attorney Joe Griffith, who represents Zerbst, said his client "made a mistake and has accepted responsibility for his conduct as set forth in the plea agreement."

It's unclear whether the unidentified co-conspirator will be charged. Michael Mule, spokesman for the U.S. Attorney's office, said the agency does not comment on active investigations. 

The Federal Home Loan Bank system was established by the U.S. government in 1932 to support mortgage lending and community investment. Its 11 regional banks provide access to low-cost funding to banks, credit unions, insurance companies and other financial groups. Its affordable housing programs are available to people earning 80 percent or less of the median income for their area.

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Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_

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