Federal bank regulators say that the collapse of Alpharetta, Georgia-based Integrity Bank owed at least partially to the fraudulent involvements of two of the bank’s former executives.

Douglas Ballard and Joseph Todd Foster were senior vice presidents at Integrity. They pleaded guilty to bank fraud in federal court in Atlanta on Tuesday, July 6, two months after being indicted on charges relating to a series of loans to a prominent bank customer that prosecutors say were made under false pretenses.

The prosecution states that the bank officers used their influence to help hotel developer Guy Mitchell, of Florida, obtain in excess of $80 million in business loans. Ballard admitted receiving $200,000 in bribes from Mitchell, and prosecutors say that Foster sold his shares in the bank based on his inside knowledge that the developer would be unable to repay the loans.

In a statement issued by the U.S. Justice Department, Mitchell deposited approximately $20 million of the loans in a checking account for personal use.

Thirty nine Georgia banks have failed during the recent recession. Since the start of 2008, 228 banks insured by the Federal Deposit Insurance Corporation (“FDIC”) have failed. In the case of Integrity, the $80 million in loans made to Mitchell constituted about one third of the $235 million in total losses suffered by the bank, which was taken over by the FDIC.

Ballard faces a potential prison sentence of up to 10 years, and Foster could be sentenced to a 20-year term.

Related Resource: Bloomberg Businessweek “Two Former Integrity Executives Plead Guilty to Faud” July 6, 2010