Sonoma Valley Bank executives Cutting, Melland sent to prison for bank fraud

SAN FRANCISCO ­- Two former senior executives at Sonoma Valley Bank and an attorney for one of its biggest borrowers were sentenced to prison Friday for their roles in defrauding the bank, which cost investors millions of dollars when it collapsed in 2010.

Sean Cutting, the bank’s former president and chief executive officer, and Brian Melland, its former vice president and chief loan officer, each received 8 year sentences from U.S. District Court Judge Susan Illston.

David Lonich, an attorney involved in the loans that destroyed the bank, was sentenced to 6 1/2 years in prison.

“This whole situation has been a dreadful one,” Illston said.

The three men - Cutting, 48, formerly of Sonoma; Melland, 48, of Santa Rosa; and Lonich, 63, of Santa Rosa - faced prison terms of up to 30 years.

People who lost their retirement savings and children’s college funds when Sonoma Valley Bank collapsed in 2010 testified the bank’s failure altered their lives, urging Illston to send a message that such conduct was unacceptable.

Denise Adams said her family lost $42,000 her father had set aside to help her son go to college. Financial pressures, in part because of the loss, forced her son to drop out of school.

“My dad felt guilty until the day he died that the investment went south,” Adams said.

Jerry Marino, one of the founding directors of the bank and an early champion of it, later became a sharp critic of its management, especially the decision to accept $8 million in federal bailout funds.

“If good banking practices and rules were followed, our community bank would still be there,” Marino said. “2008 did not take them down.”

Sonoma Valley Bank was the only bank in Sonoma County to fail during the global financial crisis of 2007 and 2008, when risky and fraudulent mortgage loans imploded, triggering a crash in the U.S. housing and financial sectors.

Cutting, Melland and Lonich were convicted in December of at least 25 different counts for their roles in a $35 million real estate loan scandal that caused the institution’s collapse in 2010. Charges included conspiracy to commit bank fraud and money laundering.

Lonich was an attorney for Marin County developer Bijan Madjlessi, who prosecutors said was allowed to use straw borrowers to gain unlimited access to loans, which he used to pay old debts, finance new projects and lead a lavish lifestyle. He died in a 2014 car crash.

Much of Friday’s hearing involved challenges by defense attorneys for the three men to details in the pre-sentencing reports conducted for the judge. She overruled virtually all of their objections, at times showing little patience for their efforts to re-argue elements of the case.

More than two dozen people attended the hearing to show support for the defendants, but they were not allowed to speak at the hearing.

Cutting’s attorney, Neal Stephens, said his client’s entire life was about “service to other people” and asked the judge for leniency for the sake of his family.

“He didn’t make a dime off any of these loans,” Stephens said.

Melissa Redmond, who developed a 42-unit mixed-use housing project on land near Sonoma Plaza, wrote a letter saying that Cutting was the only banker in the area who was willing to take the time to understand her plans.

“He believed in me and he really went to bat for me,” Redmond wrote. “Please allow what he did for me to count for something when you issue sentence.”